What’s the difference between saving and investing?


What’s the difference between saving and investing? A friend recently asked me this question and I thought it was interesting because most people appear to view these terms as two words for the same activity. However this is definitely not the case.

Savings:

Essentially saving is the money you manage to retain from your earnings each month, which you then keep in the bank on deposit. Either this money is surplus to your needs or it is a sum which you have proactively taken from your earnings at the beginning of each month in order to ensure that over time you can begin to build a significant capital sum. If you’re adopting such a proactive approach to saving then give yourself a pat on the back. However, even when money is on deposit, you should be seeking the best interest rate you can find.

Investing:

If you are saving regularly then over time you will start to build a significant sum of money and that’s when you can start thinking about investment. The point of investing is to enhance your wealth; to turbo-charge it if you like. To ensure that your hard earned money works for you and grows over time such that it keeps pace with inflation and attains a high enough rate of return to provide you with some capital growth.

Conclusion:

Investment is a serious approach to managing your wealth, spreading risk and diversifying over various asset classes. Being a saver is good; being an investor is even better.

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© Roy J Sutton and Mann Island Media Limited 2017. All Rights Reserved.


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