Saving Investing

Let's discuss about two important things which is present in everyone's personal finance planning. Saving and Investing. Yes, they are not same. We will discuss about what are they and key points on which they are very different to each other. At its most basics, saving is the act of putting money away from your income in a safe place with the intention of using it in the near future or for emergencies. Investing involves putting a part of your saved money into investments – such as shares, funds and property – with the hope that your money will grow. Now consider the following points and examine these two.

Objectives:

Objectives for savings are mostly for small term goals, emergencies and casual expenses as it provides quick access. Products like savings bank account, post office account and liquid mutual fund are best for storing savings amount. On the other hand investment are done to meet the long term goals which are 5 or more years away. The main objective is to become financially wealthy. Products like stocks, bonds, mutual funds, real estate, gold etc are main investment products.

Risk and Returns:

Savings brings us low risk and hence low returns in terms of 3.5% to 6%. In long term where India's inflation rate is generally 8%, money in our savings account losses its value. Investment are risky instruments but with right products it allows us to beat inflation value in long run.


Instruments


Liquidity:

The savings are highly liquid. You can get access to it by your ATM card. Now liquid fund also get redeemed to your bank account within 1 working days. Investments are less liquid. Redeem a real estate would take time. Mutual funds also take 2-3 days time to credit in bank accounts.

Conclusion:

Savings, alone cannot constitute 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 unlimited options to invest your earnings. It’s advisable to start investing at a young age but it’s never too late. Savings are for the present and investments are for the future. Investments are made typically for bigger financial goals which may seem impossible now but would be possible in the time to come if they are wisely planned today. Investing smartly is the key to meet such goals. It is recommended to save for small term goals but investing simultaneously may make it simpler achieve your long term dreams.

In shorts, investing is part of your saving. Whenever you put something aside you’re saving. When you put something aside with a plan for future, you’re investing.



 "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case" - Robert G. Allen

Post a Comment

Previous Post Next Post