Before you embark your journey to be an investor, one should know the basic difference between saving and investing.
Though used interchangeably, both are different.
When you set aside money for future purchases or emergencies, you save it whereas investing refers to utilizing your saved money to deposit in FD’s, buy stocks and shares, properties with a much higher growth or return in mind.
Saving is the first step towards wealth creation whereas the purpose of investing is to generate income.
There are many ways in which you can save money.
Assume you are someone who frequents restaurants. You cut short this habit and save money so that you can plan a holiday or buy a new mobile.
In investing, you invest a specific amount in FD or use it to purchase stocks or shares with a long-term goal in mind.
Only if you have savings, you will be able to invest.
Difference between Savings and Investing
- No risk involved in savings
- No returns in savings as the amount saved remains same even after 10 years
- Savings is done for short term goals
- High risk involved in investing as equity investments depend on market growth
- High returns as FDs provide 6 to 7 percent interest and shares provide higher dividend
- Investments are done with long-term goals in mind.
To the question, which is more significant, both is the answer.
However, investment holds a higher significance and can be validated through an example of buying a shirt. The shirt was priced 1500rs 5 years ago but has increased to 3000rs due to inflation. If you had saved 1500rs 5 years ago, the amount would have remained the same and proven insufficient to buy the shirt.
In case the amount was invested in FD, it would have grown into an amount sufficient enough to buy the shirt.
If you have kept aside a specific amount for short term purposes like paying your kid’s tuition fee next month, saving holds significance as hardly any time left to identify and invest the amount. But if the amount is for your kid’s higher studies next year, you can invest it in FD which provides you good returns.
Whether one should save or invest also depends upon the timespan one has at their disposal.
In short, whether to save or invest depends upon what you want to do with the money. Go through these and learn to understand your purpose with money.