Home
Financial Education
Investment

Saving and Investing - Difference and importance of Investment over only Saving.

Saving

Saving is setting aside some money for a future need from income. The primary aim is to preserve capital and get some returns on it, if possible by putting it into a savings account or Fixed Deposits.

savings, investment
Photo by cottonbro from Pexels

Investing

Investing is the process of putting your money in some investment product that have potential to generate respectable returns or help in wealth creation over a time period.

investing, investment
Photo by Tech Daily on Unsplash

The most popular investment options in India include Mutual funds, Stocks, Gold, Real estate, Bonds, ETFs (exchange-traded funds), etc. It’s important to remember that risk is part of investing process.

Importance of Saving

There are several reasons why you should save your money. Here are some of the main benefits of your savings,

  • Saved money can be used for your daily needs and future needs.
  • Savings also can act as the Emergency fund. Emergencies generally come unannounced and we should have some money parked in bank under emergency fund. Emergencies include loss of job, a medical emergency, etc. In these circumstances, you need liquidity to fall back on. It is always recommended to set aside at least 5 to 6 months of your monthly income as an emergency fund.
  • Savings can be used for investment. Savings should be invested in different diversified asset classes such as bank fixed deposits, mutual funds, stocks, etc.
  • Savings can be used for short-term goals.

Importance of Investment over only saving

Investment is very important to achieve financial freedom.  Below are some of the main benefits of investing,
  • By investing the money in high growth potential asset classes, we can earn higher returns.
  • Invested money will have the potential to beat inflation over time. If you only save your money, chances are that your value of money will reduce as inflation play its role. So, it makes sense to invest your money in different asset classes having growth potential and liquidity.
  • You will also realize your financial goals while investing your money. It is very important to set SMART financial goals first and accordingly plan your investment for a time period. The goals can be buying a flat, a car, or saving up for retirement, or paying for your child’s postgraduation. 
  • Investing money consistently can help you achieve your long-term financial goals.


Post a Comment