How many times have we asked ourselves what is better, saving or investing? Throughout our lives, we hear the benefits of saving and seeking this habit in our finances. Similarly, the stories we know about investment attract our attention.
All this makes us wonder about what is more convenient. We can tell you that neither of them is bad, on the contrary, both are good choices that you can make in your financial life, however, they do have different characteristics that you should know to make your decision.
What are the main differences between saving and investing?
To establish the elements that differentiate these two terms, let’s start by defining them and explaining their characteristics:
Savings refers to the amount of money that you separate from your income and save for a specific purpose. It is wrong to believe that saving is about the amount you have leftover, no, saving is done in a conscious, organized, and purposeful way.
Saving is used to carry out some plan or personal taste: the purchase of a good or a product, a trip, academic plans, among others. However, saving is also an excellent alternative to face an illness, a crisis, the death of a family member, or any unforeseen event.
For its part, investing means putting your money to work to make a profit. When you are going to invest, you should consider the returns that they offer you, because that concept means the profit that you expect to receive with your investment.
You may think that investing is for people who have high capital, however, it is a mistake. Some investments fit all pockets and needs, you just need to be well informed about the options on the market.
We have already analyzed each of the products, now let’s see their main differences:
Investment does not have the objective of having an amount of money saved, as is saving, it has the purpose of generating profits, which is the main difference between saving and investment. Although formal savings can generate benefits, this will largely depend on the amount being discussed and where that money is kept.
In this sense, the money we have saved may be worthless over time due to inflation, while when we invest, we seek that, that our money increases.
We have savings within reach of withdrawal at an ATM, a bank window, or the place where we have it stored. We have the money when we need it, so we can count on liquidity.
For its part, an investment is not within that reach; it does not mean liquidity, the money is working and therefore it will depend on the term that is established or the investment model in which we are, the moment in which we can access the profits.
Generally, it does not have to be applied in all cases, the savings have a specific purpose. You may use it for a vacation, university, or some plan that you have in the future.
However, it is a support in the economy that can be used for any unforeseen event. Your goal may be just that, to help deal with an unplanned event.
On the other hand, the investments are mostly medium to long-term plans. Many people make investments for their retirement or simply to make their money grow, without the need to put a specific use to it.
In the case of savings, we have the option of formal and informal savings. Always remember that informal saving has its risks that you should consider. On the other hand, if you decide on formal savings, you must make sure that it is an institution supported by the Central Bank of Nigeria.
As for the investment, once you have started it is recommended that you expand and diversify the options. It may be difficult at first, but as your money grows, it will get easier.
If you decide to invest or save, we always recommend that you find out about the safest places to stores your money and make it grow. Remember that many fraudulent institutions can deceive you and make you lose your money, pay attention to your decisions and choose what best suits your needs.
One last piece of advice: if you decide that it is time to invest, we recommend that you have some previous savings and that you take as much of it as possible to start with the investment. Do not allocate all your savings to investment, it is a good idea to always have a backup for any setback.