INVESTMENT VS SAVINGS

‘Investment’ and ‘savings’ are two important terms in financial planning. It is important to understand the similarities and differences between saving and investing your money. Knowing the difference, and when to choose each, can help you reach your financial objectives.

Difference between saving and investing,

Saving; Saving usually means putting your money into cash products, such as a savings account in a bank. Saving is typically for smaller, shorter-term goals in the near future (usually three years or less) or having money for an emergency, as a savings account gives you access to cash when you need it. You can also earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments. Saving money should almost always come before investing money. It is the foundation upon which your financial house is built. The reason for this is simple.It is our savings that provide us with the capital to feed our investments. Once a good foundation is built, one can begin investing money.

Investing; Investing is taking some of your money and trying to make it grow by buying things you think will increase in value. For example, you might invest in stocks, property, or shares in a fund. Investing is usually used for long-term goals and when you invest your money, it can take a few more days to access your money compared to a savings account. Investing also involves risk, but they have the potential for much higher returns than savings. The ultimate purpose that works behind the investment is the creation of wealth. It has a productive nature; that helps in the economic growth of the country.

Savings, alone cannot constitute to the increase in wealth, because it can only accumulate funds. There must be the mobilization of savings, i.e. to put the savings into productive uses. There are a number of ways of channelizing savings, one of them is an investment, where you can find limitless options to invest your earnings. Although risk and returns are always associated with it, but when there is no risk, there is no profit.

As the excess of everything is bad, so as in the case of saving and investment, i.e. it is important for an economy that the savings and investment should be done in the correct proportion. The excess of savings over investment will lead to unemployment, and if it is revered, then inflation may occur. To know more, visit cedruswealth.com.