Savings and Investment – Broad Definition of Both
Many at times we confuse the meaning of investment and savings to mean the same thing. Most of us even feel investing our money is as much as saving it, but investment simply means an item acquired with the purpose of generating income or appreciation in either a short time or a long time. It is the process of using your money to buy that house, land or invest in that property or stock that you think will generate a good rate of return over time. Investment can be in the form of stocks, bonds, treasury bills, property investments, real estate, jewelry or anything you have an investor feels would generate a passive income in the nearest future.
Having understood what investment is, I am sure you already know what savings are but nevertheless, we will look into it. Savings is the money you set aside for future use instead of spending it immediately. You know all those times we say ”I am saving for raining days?” this is definitely what we meant. it is the amount of money left saving from your disposable income. Most savings are done for unexpected emergencies and also to plan for future expenses that you cannot afford now. There are several ways through which one can save money, accumulating it in the form of cash holdings, or saving it in your savings account with your bank, your pension account or in any investment fund you have is one of the major ways to save your money.
Difference In Investment and Savings
Like we discussed above, investment and savings are two different words and basically perform different jobs. While one can help you secure and also grow your money the other can only secure your money.
1: You invest money with the aim of making it grow but you save money for rainy days and unexpected financial emergencies
2: You invest by buying stocks, lands, property investments, treasury bills but you save by depositing your money in your savings or current account and also in fixed accounts.
3: Investment provides returns and also helps in wealth creation through passive income while savings fulfill short term or basic requirements only.
4: The returns on investments are comparatively high and continuous depending on the investment portfolio but savings give none or less interests on deposits
5: The risk involved in Investment is high while saving risk is low
6: Investment helps one to be productive in thinking but savings helps you to think only on where to channel your funds saved to on wants and needs.
7: You can have access to your savings, anytime you desire 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.
Savings alone cannot create wealth because it is only a means of accumulating funds for emergencies occurrence. You must be willing to put your savings into productive use before you can think of creating wealth through investment.
Also, your savings are determined by your income. The higher the income of a person, the higher is his ability to save, because the rise in income increases the capacity to save.
In other words, investing is another kind of saving. Whenever you put something aside, you’re saving. When you put something aside with the intention that it will provide a bonus to you after you set it aside, you’re investing.
I hope I have been able to discuss in full detail the differences between savings and investments. for low risk and high-value investment on property development, visit our website www.peinmoney.com or call us 09054444464 | 09054444474