In India, the terms “saving” and “investing” are almost always used interchangeably. Most of the time, we refer to longer-term goals, for example—“I’m saving for my son’s college education.” But we also treat “saving” and “investing” the same way; that is, we use the same approach or asset types to pursue a goal, whether short-term or long-term. For instance, while accumulating money for retirement, we try to determine “How much cash should I keep in my portfolio?” Or in another instance where one considers his stock funds his “emergency money.”

Saving. Investing. It’s all the same, right? Not necessarily. They aren’t the same, even though they appear very similar. Arranging your financial life so that both play an important role can help you grow wealthier. If you are not doing either, its time to get started. This may require changes in spending, tracking and change in utilization of your income, but can and should be built into your plan.

A general rule of thumb is we should not save long term but should invest long term. We should not invest short term, but save short term. They have different purposes, and play different roles, in your financial strategy and your balance sheet.  Making sure you are clear on this before you begin your journey to building wealth and finding financial independence is vital because it can save you from a lot of heartache and stress.

In order to achieve the best possible results, it’s crucial that you match your saving or investing goals with the proper financial tools.

There IS a difference!!

Saving, by definition, involves the protection and preservation of money from loss. Investing, on the other hand, means to make a long-term commitment of putting money away and letting it grow. This involves risk, such as the occasional and inevitable downturns in the market; however, over the long-term (five years or more) those dips are expected to smooth out into an overall upward growth pattern.

Think of “saving” as putting money aside gradually for a short-term goal, typically into a bank account, one that you’ll fund primarily with your own money. People generally save for a particular goal, like paying for a car, a deposit on a house, or any emergencies that might come up. Saving money is the process of putting cold, hard cash aside and parking it in extremely safe, and liquid (meaning they can be sold or accessed in a very short amount of time, at most a few days) securities of accounts.  Above all, cash reserves must be there when you reach for them; available to grab, take hold of, and deploy immediately with minimal delay no matter what is happening around you.

Conversely, “investing” is putting money aside for a long-term goal, one that will be funded greatly with the year-in, year-out compounded returns of stocks and bonds. Investing money is the process of using your money, or capital, with the aim of making it grow, to buy an asset that you think has a good probability of increasing in value over time, such as stocks, property or shares in a mutual fund, making you wealthier even if it means suffering volatility, perhaps even for years. Amount needed for retirement and possibly college are so large that likely the only way you can reach them is with the help of the investment markets.

Where do you draw the line?

Generally speaking, short term is under 3 years and long term is over 3 years but when it comes to saving and investing, do not be too tied into the specific amount of years but more into the need of the goal. Keep in mind when you will need funds, what your plan is for the funds and the safety/risk associated with it.

In the end, do not wait to do either. Time is the greatest opportunity to grow your money and to meet your goals. With as little as Rs 500, you can start investing and start the path to reach your long term goals and success.



Short-term: Ready to go
Saving is typically for smaller, shorter-term goals in the near future (usually three years or less) like going on an annual vacation or having money for an emergency.

Long-term: Achieve major goals
Investing can help you reach bigger long-term goals (at least four to five years away), like saving for a child’s college education or buying your dream home.

Ready access to cash
A savings account or other savings avenues give you access to ready cash when you need it.

Harder to access cash
When you invest your money, it’s typically not as easy to get your hands on it quickly as compared to a savings account.

Minimal risk
Money in savings accounts are at minimal or no risk because your funds are insured to a certain limit by Deposit Insurance & Credit Guarantee Corporation.

Involves risk
You may lose some or all of the money you invest if not planned properly. However, this risk reduces significantly as your investment time-frame increases.

Earn interest
You can earn interest by putting money in a savings account, but savings accounts always earn a lower return than investments.

Potential for profit
Investments have the potential for higher return than a regular savings account. Your investments may appreciate over time. If you sell for higher price than you invested initially, you make a profit.

I hope with this insight, you have understood the difference between savings and investing and also would invest wisely rather than save everything that you earn!

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    • Am on Instagram but not as a blogger or an advisor, just personal stuff there yet. Any particular reason for you asking this?

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