Savings and investment are two terms that are often used interchangeably. However, there are a few differences. Irrespective of the differences, they are both equally important. In order to ensure financial safety, you should be saving as well as investing. While saving can help you meet short-term goals, investment can assist you in achieving long-term goals.

With that in mind, here are a few major differences between saving and investing.

When people save money, they intend to access it quickly in the future. Often, individuals open savings accounts to park their funds. These accounts offer low risk and funds can be easily withdrawn from them.

Meanwhile, investments enable a person to create more wealth. Investments are primarily made in life insurance policies, stocks, mutual funds, bonds, etc. With the help of investments, a person can build a corpus for retirement, children’s education, and other long-term goals.

Saving Vs Investment

Purpose

The purpose of saving and investing is different. You save in order to keep your money safe and achieve short-term goals like accumulating funds for a vacation. However, investments are made to make more money and to fulfil long-term goals.

Risk

Risk is another major differentiating factor. The risk of losing money when you save it in a savings account is very low. However, investments incur more risk. The likelihood of losing money increases.

Returns

This is the reason why many people choose to invest. While saving can keep the money safe, it won’t help in earning significant returns. Meanwhile, investments made in stocks, mutual funds, etc. can provide an investor with great profits.

The Advantages and Disadvantages of Saving

Advantages-

  • If you park your funds in a savings account, then you can earn interest on your balance.
  • Money can be easily accessed when it is in a savings account.
  • Saving doesn’t require much effort. You don’t have to be a financial expert to save money.
  • Savings accounts offer very low risk as they don’t fluctuate with the market.

Disadvantages-

  • The interest rates on savings accounts are low. Therefore, the returns you earn will also be low.
  • You may lose your purchasing power because inflation can eat into your savings.

Situations When Saving Can Help You-

  • To make the down payment on a house or a car.
  • To pay for a medical emergency.
  • To fund a vacation.
  • To buy new appliances.

The Advantages and Disadvantages of Investment

Advantages-

  • Compared to saving, investments can provide people with higher returns. Investments are especially beneficial if an individual invests for a longer period.
  • Investments increase the value of your money. You can allocate funds as per your risk appetite and financial goals.

Disadvantages-

  • Investments incur a lot of risks as they are market-driven. Therefore, a market problem can significantly impact the funds you have invested.
  • The risk of losing your capital increases.
  • Investing can be complex. Therefore, you might require professional help constantly.

Situations When Investments Can Help You-

  • To accumulate a retirement fund.
  • To pay for children’s education.

If you want to gain the benefits of savings as well as insurance, then you should consider life insurance. HDFC Life Sanchay Plus is a non-linked policy that offers assured returns. This plan provides life cover to secure your family’s future and life-long income option.