Savings vs investment

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Post on 23-Aug-2014

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Major points of difference between savings and investments.

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  • Savings vs Investment
  • Lets understand savings and investment together
  • What is Saving? Saving is when your income is more than your expenditure. Income includes salary, interest from your bank or property rent etc.. We generally do savings to fulfill a dream, for eg, buying a property, automobile, etc. Savings starts at very young age when a child does not get his favorite toy and there savings come in action. They start saving the pocket money to buy the gadget or toy Savings insures financial stability for future.
  • What is an investment? Investment means spending your savings to earn profit. Savings only means to save a particular amount without any profit, however investment consists of putting savings in various areas such as fixed deposit, mutual funds, gold, etc which generates a rate of interest return on your invested money. The challenge in investing is proper financial planning to get maximum profit
  • Inflation means a substantial increase in the price level of goods and services in an economy over a period of time. Yours savings of today may not meet your future demands because of inflation. If a property is worth 30 lacs today and you start saving to buy it in next 5 years, mere savings will not help because inflation will rise the property rate and your savings will not be sufficient to own your dream home On the other hand, investment which has risk attached with it can give valuable returns if the investment is managed properly Inflation
  • Both savings and investment play important role in financial planning To meet short term goals, for eg, buying a gadget savings can be useful but when financial responsibility comes in action investment is the wise mans choice. Financial responsibility increases over a period of time say, marriage, kids, kids education, childs marriage, old age finance independence.
  • So, to meet your financial responsibility start small investment from today. If you have a saving of Rs. 3000 a month, start investing in low risk mutual funds. Mutual funds are subject to market risk but gives a good ROI if the investment is managed wisely
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