While saving and investing are both essential when it comes to being financially secure. Even though one cannot make do without having savings, it is still crucial to invest your money instead of simply saving it. So, let us try first to understand the difference between saving and investing.
Saving you money is essentially putting it aside for future use. People keep their money to use it later in case of emergencies or whenever they need it. Savings could be done for a specific purpose as well, like buying a vehicle or a house. There are various ways you can save.
Opening a savings account to keep your money is one of the most common ways to save money. In addition, you can issue a debit card to your savings account.
Instead of keeping your money at home, it is better to put it in a savings account so that you can receive interest on the money as well. If need be, you can even bill pay using your account. This money is available for you to use whenever you need it.
Similar to saving your money, investing is also putting it aside for future use. However, though dissimilar to saving, investing is not meant for immediate future use. For example, you cannot use your invested money through a UPI payment app. Also, unlike savings, when you invest, you receive a higher return. When you save your money, you get little to no return. But investing gives you returns on your cash depending on the risks you are willing to take.
Ideally, one should invest for at least about five years or more. Short term investments do not yield as many returns as long term investments do. It is easy to lose money on short term investments while long term investments do not have as much of a risk.
Some of the pros of investing are as follows:
1. Return on investment: the massive benefit of investing is receiving a greater return on your investments. Savings may give you returns, but the returns on investments are much higher compared to its counterpart. Your investment can essentially double in about a decade. One cannot hold the same for savings.
2. Inflation: When it comes to inflation, it is significantly easier for you to lose the value of your money if you only save it. An equal amount of money becomes worthless after a few years due to inflation. Investing your savings would recover it from inflation. Keeping your money at home and saving it for years and decades could mean losing a lot of worth. The previous amount of money could buy you multiple things a decade before today. But, now it would be hard to manage the same.
In conclusion, saving your money is crucial. But holding all your money in savings is unnecessary. To put it in simpler words, investing your money will increase it. You would not have to do anything. Of course, you can put a certain sum of money aside for emergencies. But a significant percentage of your money should be invested not to lose any upholding worth.