You have recently settled down and have been employed by one of the best company. You don’t have a lot of commitments and you are torn in between investing or saving part of your income. To make an informed decision you need to understand the difference between investments and savings.
What Is The Definition Of Savings And Investments?
It’s vital to understand the meaning of savings and investments. Investments are assets or item that you buy hoping to generate income in the future on selling them. It means that the item you buy will appreciate in value and you will gain financially if you sell them. On the other hand, savings is putting money in a secure place in the hope to use it soon. You put it in a safe place to utilize it in case an emergency occurs.
Where To Save And What To Invest In?
You can save your money in bank accounts, savings fund, and emergency fund. But when it comes to investments, you can invest in shares, stocks as well as properties. Also, you can access your savings anytime, but for investments, it is not possible. If the money is the bank account, all you need to do is to withdrawal the money from where you have kept it. If you have invested in stocks, you have to sell them first. As a matter of fact, you may not find a buyer immediately; it may take some time.
Between Savings And Investments, Which One Is Safe And Profitable?
Remember, in investing; you hope to gain financially. You can also make a financial loss. Therefore, an investment involves a greater level of risk. When it comes to savings, your money is very secure. You have kept it for use in case a need arises. Your aim is not to make more money. Although investing bears a risk, it can enable you to build wealth over time. Investments yield good returns if left for a long time. Whereas in saving, you will not get good returns. What you earn is only interest. But the interest is very minimal if any.
In conclusion, both savings and investments are critical. You will be guided by your financial goals, time frame, and liquidity. If you plan not to use the money anytime soon, it is better to invest it to enable you to accumulate wealth over time. If you need to access your money anytime, consider saving the money. Since you have understood the difference between investments and savings, be wise enough to save and invest.