Differences between Saving and Investing

Saving and Investing sometimes are used interchangeably but there are differences.

Saving refers to putting money aside for future use rather than spending it immediately thus involving low risk and low returns while Investingrefers to putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

Below are the differences between Saving and Investing

Purposes

You could be saving towards getting a new house, paying house rent, buying a car or for any financial emergencies, etc. Financial institutions offer several different savings options. We also have some savings mobile apps that you can use to automate your savings whether daily, weekly or monthly. The higher the income of a person, the higher is his capacity to save. We can also say that it is not a person’s ability to save that encourages him or her to save money, but the willingness to save compels him or her to do so.

On the other hand, you can invest your money in stocks, property, real estate, shares in a mutual fund etc. Investments are usually done to achieve long-term goals. Hence, it is categorized as income investment or growth investment.

The purpose of saving is to fulfill short-term or urgent requirements while investingis done to provide returns and help in capital formation.

Risks

The risk associated with investing is very high while saving is low or negligible

Returns

Returns are comparatively high for investing while there is less or no returns for saving

Liquidity

Liquidity is high in savings because you can have access to your money anytime, but in the case of investment, you cannot have easy access to money because the process of selling the investments takes some time, hence, less liquidity.

PS: Making a choice between either saving or investing will depend on your goal(s) for the money and your risk tolerance.

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