The wealth-building plan is important for ensuring a secured financial future. When it comes to financial terms, savings and investments are often used interchangeably, but these two are actually different terms.
An investor, before making any kind of investment, should know the basic difference between saving and investing. While both of them are essential for a secured future, the way they function is totally different.
Both saving and investment play an important role in shaping our financial strategy. Knowing when to save or invest is crucial in your financial journey.
Saving is referred to as that part of income that is not used for consumption, it is the act of keeping aside money that is required for later use.
In other words, savings can be defined as an amount that is left after meeting all the expenses from the disposable income of a person.
Investment is the process of buying an asset that is acquired with the purpose of generating income over a long period of time. It is done with saving to generate wealth and returns (or get greater returns).
The main purpose of investing is to create capital appreciation and investment can be done through instruments such as bonds, shares, mutual funds, etc.
Let us discuss the most important points of difference between saving and investment.
|Basis of comparison||Saving||Investment|
|Type of account||Savings account||Brokerage account|
|Type of return||Fixed return||Fluctuating rate of return|
|Return on investment||Low returns||High returns|
|Liquidity||Has high liquidity||Has low liquidity|
|Protecting against inflation||Offers little protection||Offers greater protection from inflation.|
This concludes the article on the differences between saving and investment. To read more of such interesting concepts, stay tuned to our website.