Difference Between Savings and Investment

Difference Between Savings and Investment

  • Generally, people know that savings and investment are not the same but they do not know the exact difference between them. 
  • Both deals with the two terms that are risk and liquidity. Savings are the low-risk funds which are available when needed. So, the main purpose of saving money is to get in within a short span of time. Investments need a long time and it builds wealth. Investments have a high level of risk and it also gives a high level of returns. 
  • Savings is a part of disposable income that is not used while doing consumption. It means after paying all the expenses whatever is left out is called saving. Investment is the process of investing the saved money into the financial instruments to earn a profit 

Savings

  • Savings are the portion of a person's disposable income that is not used for consumption but it is kept apart for the later use. 
  • Savings are kept to meet the unanticipated or unforeseen circumstances. 
  • Savings help to secure the future and make a person financially safe and stable. 
  • Savings can be done in many ways like collecting money in the form of cash or to deposit money in banks saving account or fixed account. 
  • Savings can be decided by the person's level of income and varies from person to person. It means if the level of income is high the savings will be high and if the level of income is low the savings will be low. 
  • Savings gas diverse effect on the economy like if the rate of savings is high there is a low level of consumption and vice a versa. 
  • Savings is based on some factors like financial background and willingness of a saver. 

Investment

  • In simple words, the process of investing in anything is called an investment. 
  • Investment can be anything like money, time or other resources which gives a return in future. Investing is the way that a person will begin to really grow his money and begin to build wealth. 
  • Investment is the present consumption to get a high rate of returns in future. 
  • The main purpose of the investment is to create wealth in the form of an increase in capital, interest earnings, dividend income, rental income and so on. 
  • Investments can be done in a various form of securities, a stock market, mutual funds, pension scheme, commodity market, options, currency market, or in assets. 
  • Investment always carry a high level of risk it means there is a chance of losing money but along with it also carry a high level of earning if everything goes well. 

Difference between savings and investment


Meaning:

  • Savings are the portion of a person's disposable income that is not used for consumption but it is kept apart for the later use. 
  • Investment is the process of investing money in capital assets, a stock market, and commodity market and so on to earn returns in future. 

Aim:

  • Savings are just the accumulation of money for the future requirements. 
  • Investment is done to get returns and help to form capital in future. 

Period:

  • Savings are for the short term only for the 1- 5 years and it has a small goal like to purchase a cell phone in 6 to 8 months. 
  • Investments are for the longer term that is more than 10 years and it has big goals like education of a child, retirement plan. 

Risk:

  • Savings has a very low level or we can say no risk at all and a safe option. 
  • Investment has a very high level of risk. 

Return:

  • Savings has a low level of returns. 
  • Investment has a very high level of returns. 

Liquidity:

  • Savings is highly in liquidated. 
  • Investments are lower in liquidity. 


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