Difference between saving and investing

gboyinwa ajomale

December 13, 2017 1:57 PM

You need to know the difference between the saving and investing before you embark on your financial goals.

Saving and investing have totally different meanings.

Saving and investing both play important roles when it comes to finance but they serve different roles and purpose.

You need to know the difference between saving and investing before you embark on your financial goals.

Definition of savings

When it comes to personal finance, saving is the money you don’t spend but you set aside for a particular reason or purpose, putting in a safe place.

You could be saving for a particular thing or purpose, probably a car, house or even an investment.

When saving money, the best place to put your savings should be at a bank, where you can access it anytime you need the money.

Definition of investing

Investing, on the other hand, is putting your money into a venture to generate more money. Investing can come in different forms, like buying of assets or buying stocks or investing in a prospective business you feel can give you good returns in the future.

Investing is making money do the work of making more money for you.

Are there risks involved in savings and investing?

The risks involved with savings are minimal. The thing about saving is that your money is just in the bank untouched with little or no interest on it.

Apart from the low-interest rates that come with some certain kind of savings scheme, the only thing that can happen to your savings is if the bank goes into liquidation and you are unable to get your savings out, which rarely happens.

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When it comes to investing, there is a high-risk level, which is why you need to research on what you want to invest in before delving into such investment.

Find out the risks involved before you put your money into an investment.

What comes first – savings or investing?

You need a substantial amount before you invest in a venture. So the first thing that comes first should be your savings.

Without money, you cannot have an investment. You should also note that you cannot put all your income and savings into an investment.

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You should have enough to still sustain you after you put a substantial amount of money into an investment.

Your savings should be enough to cover all your personal needs, which means it should be able to cover the important aspect of your life financially.

How much should be saved and how much should be put into investments?

You can never save enough because there would always be financial goals you would want to meet.So you need to keep saving, but you need to save for a purpose.

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For investing, as long as you can afford such investment and it won’t affect your finances negatively, then you can keep investing. But remember there are risks involved when it comes to investing.

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