Difference between Saving and Investing – Financial intelligence is one of the things that can help someone to have good finances in the future. No need to wait for high income first, financially smart you need to apply early on.
Setting the cost of expenses each month is the first step that must be done. Starting from basic monthly needs to saving and investing.
Talking about saving and investing, this is a good recommendation in finance. It's a bit difficult, but if done consistently, saving and investing will pay off quite large in the future.
Unfortunately, most people still think that saving and investing are the same form of spending. Apparently, there are still many who do not know that saving and investing are two different things.
For that, here are some differences between saving and investing. Read the explanation, yes!
Read also: The way to manage money and grow it: a success!
8 Differences between Saving and Investing
1. Differences Based on Functions
Usually saving is used to save a reserve or emergency fund. This is of course done to anticipate sudden daily needs. Saving money is usually also stored in places that are easily accessible by the owner.
In contrast to investment, investment is an investment activity in certain instruments. Investments are made in the long term. The point is that the benefits of investment can be felt in the future.
Investment profits are obtained from the interest invested. Usually, it only makes a profit after 3 to 5 years of investing. Investment returns are also generally used for your retirement funds in the future or even the cost of educating your children or grandchildren in the future.
2. Investing Has Higher Profit Potential
Investment is one of the important steps to help achieve financial goals in a short time. Why so? This is because the investment has a high enough potential to generate profits.
But, you can't enjoy these results in a short time. Because the investment is usually done in the long term. So, the results obtained will be quite high.
Along with the times, investing now comes with a more modern and easy-to-access concept. In fact, you can invest with limited funds. Currently, there are several investors who can invest starting from only IDR 100,000.
In addition, the minimal capital value will also make it easier for potential investors to invest, you know! However, if you have large enough funds, opening a deposit can also be an option.
3. Less Risks and Benefits of Saving
Saving is a form of savings that you can use as a financial reserve. The more diligent you save, the more funds are saved. However, the benefits of saving can be said to be not large, whether it is saving independently or in other places.
Because saving is a short-term savings that can be used at any time. So, the results are not like investing which can only be used after the next 3 or 5 years.
4. Many Options in Investing
The higher the profit you can get from the investment, the higher the risk you have to bear. For that, as an investor you must think carefully before deciding to choose one of several types of investment.
If you only have minimal capital, you can invest in stocks, mutual funds, or even save gold. But, if you have a high enough capital, there's nothing wrong with choosing property investment or gold bullion.
5. Product Types and Forms
In general, in saving, what is used is money. Money can be saved in financial partners, cooperatives, or even financial applications, be it in the form of savings or deposits. While investing, you can choose various existing investment instruments.
There are two types of investment, namely real asset investment and financial investment in several capital market products. Real asset investments can be in the form of gold and property goods. While capital market investments can be in the form of bonds, stocks, and mutual funds.
The types of investment products above can grow in accordance with capital market conditions. The potential profit obtained can also be higher than ordinary savings.
6. There are types of futures saving activities
Term saving is a type of saving that is often used by customers who use financial partners. This futures savings can really help you to achieve the financial targets you want.
This type of activity is where the customer must save for a period of time determined according to the agreement. The results of the savings may not be taken until the agreed time. If you have to take it, usually you will be fined.
This futures savings program also has various programs that can be tailored to your needs. For example, to fund education, get married, build a house, or vacation.
7. Access Savings
Saving and investing have a significant difference in access to storage. When you save, you can take money whenever and wherever you need it.
You can take savings funds as you like and there is no limit in taking them. You just have to visit the ATM or the cooperative, if you save it at the cooperative.
Unlike the case with investment, when you invest money, you can't take it at will. This is because there is a period of taking the money invested. This period does limit you in taking money because the investment is intended for long-term storage.
8. Level of Weakness
When saving, the money you save cannot grow significantly. Meanwhile, when investing, you can bear the risk that is proportional to the profit earned.
For this reason, it is necessary to have the ability to carry out these two types of activities because each has its weaknesses. And at any time you can bear the risk.
Read also: The Importance of Money Management Apps You Must Know!
Those are some of the differences. So, are you interested in saving and investing now? If you're interested but still unsure, don't worry! Learning finance can not only start with saving and investing, FYI. You can also start learning finance by starting to manage finances for yourself and your family.
Well, one of the family finance applications that you can use is the Whiz App! Whiz provides various interesting features to train your financial literacy that can be used with your family. Curious to try Whiz?
You must be logged in to post a comment.