Actually there are major differences between saving and investing. In previous post, I have combined saving and investing together. At times, the word 'saving' that I used, can be translated directly as 'investing'.
The Definitions:
This is my personal definitions of saving and investing. Saving is putting aside my money in some place in which I will be able to get it anytime I want without any delay. Saving is intended to smoothen my cash flow without any intention of getting any return from the activity.
However, investing means allocating some portion of my money in places where it can grow and yield return in medium or long term. To stay solvent in this modern world, it is important to have both elements in our financial plan.
How They Differ
Goals: Saving is for short term goal and to ease daily business transaction or in emergency. Investing is mainly moderate (3 years) to long term commitment. The money is less liquid in investing compared to saving. For example, saving maybe used to purchase new sofa set while investing is for children's education.
Vehicles: Saving and Investing vehicles are not the same. The most common form of saving is bank account (saving and current accounts). Meanwhile, investment can be made in the form of bonds, mutual funds and property.
Return and Risk: Most likely the return of investment is much higher than saving. The same apply to the risk associated with both methods.
Liquidity: It is easier to get my saving money at any time I want. By using ATM card and Internet banking, any transaction can be made by just touching few buttons. Meanwhile, money which is invested takes time to be converted into cash. This may take several days.
The Definitions:
This is my personal definitions of saving and investing. Saving is putting aside my money in some place in which I will be able to get it anytime I want without any delay. Saving is intended to smoothen my cash flow without any intention of getting any return from the activity.
However, investing means allocating some portion of my money in places where it can grow and yield return in medium or long term. To stay solvent in this modern world, it is important to have both elements in our financial plan.
How They Differ
Goals: Saving is for short term goal and to ease daily business transaction or in emergency. Investing is mainly moderate (3 years) to long term commitment. The money is less liquid in investing compared to saving. For example, saving maybe used to purchase new sofa set while investing is for children's education.
Vehicles: Saving and Investing vehicles are not the same. The most common form of saving is bank account (saving and current accounts). Meanwhile, investment can be made in the form of bonds, mutual funds and property.
Return and Risk: Most likely the return of investment is much higher than saving. The same apply to the risk associated with both methods.
Liquidity: It is easier to get my saving money at any time I want. By using ATM card and Internet banking, any transaction can be made by just touching few buttons. Meanwhile, money which is invested takes time to be converted into cash. This may take several days.
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