Savings

Investing vs Saving – Key Differences and When to Choose



NNA |
Updated:
August 23, 2022 1:33 p.m. STI

New Delhi [India], Aug 23 (ANI/India PR Distribution): Saving and investing are two different concepts that people generally misjudge. You need a thorough knowledge of both plans to see the difference between saving and investing. Wondering what the difference is between saving and investing?
Let’s start by understanding what each term means. Keep reading to know the details:
Investment
It refers to the asset or anything of value acquired to generate income or appreciation. It refers to the process of using money or capital to buy the assets that can help you develop a safe and acceptable rate of return over time. Some investment options include stocks, bonds, mutual funds, derivatives, real estate, and anything that can produce income, usually in the form of interest or rent, among others.
Savings
Savings refers to the amount left over after spending disposable income. It is money that you set aside for future use rather than spending immediately to meet short-term needs. Savings help you ensure your financial security during uncertain and unpredictable times. Money can also be saved for the purpose of buying expensive items that are too expensive to buy on a monthly income.
Investment vs Saving
Now that you know what investing and saving mean, here is the difference between saving and investing.
Meaning
Investing is the process of using your money for the purpose of making it grow within a specific time frame. Whereas saving is putting money aside gradually, especially in a bank account, with the aim of remaining financially secure in times of emergency.
Objective
The investment is made specifically for the purpose of providing returns and aiding in capital formation. To get the best investment result, you should do thorough research before investing. At the same time, savings are made to meet short-term and urgent needs.
Risk
Savings is a risk-free plan with no risk associated with losing money. If you are a risk averse person and want to grow your money and stay saved for uncertain times, you should always prefer savings. While, at the same time, investing is a bit of a risky option. Therefore, it takes extensive research to predict whether the investment will be successful or not – the higher the risk, the higher the chances of winning a huge amount. So, for risk lovers, investing is the best option.
Return
Since investments are risky options; hence, they even earn investors comparatively higher returns compared to the return on savings, which is either nil or significantly lower.
Liquidity
It is difficult to get the money back from your asset instantly, or in case you need money instantly. Investments are therefore less liquid. At the same time, savings are very liquid since you will have cash on hand to meet immediate needs.

Below is the table to summarize the difference between savings and investment
Features – Savings:
Account type: Bank
Returns: fixed returns
Risk: risk-free option to save your money
Products: Savings accounts, CDs
Time horizon: includes a shorter term
Liquidity: Most liquid form
Characteristics – Investing:
Account type: Demat account, ULIP packages
Yields: comparatively higher yields
Risk: risk prone (invest according to your risk appetite)
Products: Stocks, Bonds, Mutual Funds, Assets, ULIP
Time horizon: longer term, i.e. at least five years and more
Liquidity: less liquid, because you need time to have cash from the amount you have invested
Conclusion
Saving and investing both matter and requirements dictate the way forward. You cannot choose at random to opt for savings or investments. You need to know the difference, understand the pros and cons, and then make a decision. Now that you know the difference between saving and investing, you need to make an informed decision about where you should invest your money. You can save for emergencies and invest to achieve long-term financial goals.
There are different plans from different insurers. For instance, Kotak’s life offers both savings and investment plans. If you are looking for it, you can opt for Kotak e-Invest and Kotak Guaranteed Savings Plan.
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