Saving is not equal investing.

Saving and investing are fundamental to financial security.

What’s the difference between saving and investing? The terms saving and investing are often
used interchangeably, but there’s a difference.

At its most basic, saving is the act of putting money away in a safe place with the intention of
using it in the future.

That’s savings are setting aside money you don’t spend now.

Investing is buying assets such as stocks, bonds, mutual funds or real estate with the
expectation that your investment will make money for you.

That’s investing involves putting your money into investments.

The basic differences between savings and investment are explained in the following points:

Savings means to set aside a part of your income for future use. Investment is defined as the
act of putting funds into productive uses, that is investing in such investment vehicles which can
reap money over time.

People save money, to fulfil their unexpected expenses or urgent money requirements.
Conversely, investments are made to generate returns over the period that can help in capital
formation.

With an investment, there is always a risk of losing money. Unlike savings, where the no or
comparatively fewer chances of losing the hard-earned money.

Undoubtedly, the investment provides higher returns than savings, as there is a nominal rate of
interest on savings. However, the investments can earn money more than the invested amount,
if invested wisely.

You can have access to your savings, anytime because they are highly liquid, but in the case of
investment you cannot have easy access to money because the process of selling the
investments takes some time.

Both saving and investing have advantages and disadvantages. Where you decide to put your
money will depend on your reasons for wanting to grow it. Here are some of the most important
elements of both:

The pros of a Savings account:

1. A savings account offers you easy accessibility to your money;

2. Savings accounts are low-risk, as they are stable and don’t fluctuate with the stock
market.

The cons of a Savings account:

1. Interest rates on savings accounts are lower than on more high-risk investments;
2. Saving takes a lot of discipline and commitment. Easy access to your funds may lead to
spending your savings on impulse buys.

The pros of an Investment Account

1. Investment accounts typically provide potential for greater returns than savings
accounts, over longer periods of time;
2. An investment account allows you to make decisions regarding how to allocate your
funds in the account.

The cons of an Investment Account

1. Investment accounts are subject to market volatility;

2. There is the potential for loss of capital;
3. Investments accounts are typically subject to higher fees.

Savings, alone cannot constitute to the increase in wealth, because it can only accumulate
funds. There must be the mobilisation of savings. As the excess of everything is bad, so as in
the case of saving and investment, i.e. it is important for an economy that the savings and
investment should be done in the correct proportion.

Knowing when to save and when to invest your money is a key part of your wealth building plan.