Savings and investment- juxtaposition and difference

Saving and investing are both important concepts for building a sound financial foundation
and often times most individuals use them interchangeably
(savings and investment). Are they entirely different from each other? Yeah definitely, do
they share little similarities? Yes, but they are entirely different things, carrying different
purposes and playing different roles in your financial strategy and your balance sheet.
Before you begin your journey to building wealth and financial independence, make sure you
are clear on these fundamental concepts, it’s the most rudimentary financial concept that
you shouldn’t be ignorant.


What does savings entail?
It is the process of stacking money aside for a futuristic expense, event or need by stacking
it in bank accounts. The money is readily available immediately you need it, it’s more like a
call deposit for purchases and emergencies and it is extremely low-risk and highly liquid, keyword- (low- risk and highly liquid). People save for a plethora of reasons ranging from payment++ for an item, a trip, a car to educational expenses and miscellaneous expenses.
Investment on the other hand is streamlined to the acquisition of an asset or item with the
long-term goal/ objective of generating income or appreciation. Appreciation refers to an
increase in the value of an asset over time. When an individual purchases a good/stock as
an investment, the motif revolves primarily around the creation of future wealth.
How are they similar? Saving and investing have a myriad of differences, but they share one
common goal: they’re both strategies that help you accumulate money. “First and foremost,
both involve putting money away for future reasons be it short or long term,” says Chris
Hogan, financial expert and author of Retire Inspired.
The biggest differences between saving and investing are the ‘level of risk taken’ and
‘timespan’.
Saving typically results in you earning a lower return but with virtually no risk. In contrast,
investing allows you the opportunity to earn a higher return, but you take on the risk of loss
in order to do so. Savings are best for short-term goals, while investments are for long-term
goals. Investing is best for long-term commitments to earn returns.
If you’re trying to accumulate a smaller amount for a short-term goal, then a savings account
is probably the way to go. Alternatively, if you’re trying to save for a large, long-term goal like
retirement, an investment account is more in line with your needs.