Most of us always think, money saved and deposited in bank is always means money invested as bank gives up interest. Well this is not true at all.
3 Difference Between Saving and Investing
You save money to get secure from future problems and you invest money to gain more wealth, save tax and many more reasons. So, here we are explaining you how investing and saving are different.
Savings have short time period and gives safe returns while investing not the same. If deposit money in saving accounts, you can get regular interest income and you can get your money back whenever you want. Saving has very short term (of one money) period while in investment schemes, its is not the same.
If you invest in mutual funds, stocks or gold, you are taking risk of loosing money. You need to invest money for some time period. Lock in periods and other things are there in which you cannot get your money back for some period of time. The return also totally depends on the market (while in savings market has no role to play).
For example, if you want to buy a new car after 3 years and you have 2 lac right now, you just keep aside Rs.25000 every money for 3 years so you can buy 8 lac of car after 3 years as money in saving account will give you pre-decided interest on amount saved (but if you invest those money in investment schemes, you may even lose all your money or gain double).
Types of financial schemes
As mentioned above, in investment, you can invest your money in mutual funds, stocks, bonds or gold while for saving purpose, you deposit money in bank saving account. Saving money in bank is risk free, you are going to get 4% of annual interest on money deposited for sure.
While investment schemes comes with risk options. You need to invest for long time and to take big risk to get more wealth of money you invested. As return depends on the market movement.
Access to your money
Saving gives you more liquidity in terms of access to you money. If you need money for emergency, you can just go to bank or ATM and withdraw money from your account. Same thing is always true with Investment schemes. There are some schemes which won’t give your money back until lock in period or you lose big money.
Also, it takes bit more time to get your money back from mutual funds and stock market. So, you can’t get access to your money.
So what to do, invest or save money?
If you ask anyone, nowadays everyone wants money to be invested in mutual funds. Says its a Morden way to saving. So, if you got some money after monthly expense and not going needed for sometimes, better to invest in mutual funds schemes or stocks.
Investment plans will give you better investment than saving schemes of bank. Only thing you need to remember is that read things related to investment before investing, as most of investment schemes (mutual funds) come with lock in period, So you won’t get your money back in emergency. You can check online websites and invest in mutual funds directly Or you can do Mutual Funds SIP where you can invest money on monthly basis.