Investing vs Saving: Difference and Comparison

Accumulating and building wealth is essential for an individual to secure his financial future. Investing and saving are both economic terms concerning money or assets.

Both are interchangeable terms but have completely different meanings. Both are activities performed to enhance or increase an individual’s wealth.

Key Takeaways

  1. Investing involves using money to buy assets that have the potential to increase in value over time and generate a return on investment.
  2. On the other hand, saving involves putting money aside for future use, in a savings account, without any expectation of generating a return on investment.
  3. Investing carries a higher risk and potential for higher returns than saving, which is considered a low-risk, low-return strategy for preserving wealth.

Investing vs Saving

The difference between investing and saving is that investing means putting money, effort, or time into financial schemes, property, or commercial ventures and shares with the expectation of profit.

Saving refers to the money left over from an individual’s income which is kept for later use. The surplus amount is available after the consumer’s expenses are subtracted from the revenue earned in a given period.

Investing vs Saving

Investing is allocating resources (money) to generate income or a greater payoff in the future than what was originally put in. Saving is the money put into an account at a bank or a similar financial organization after being set aside from the current income.

Savings may be in the form of increased cash holdings in banks.

Comparison Table

Parameters of ComparisonInvestingSaving
MeaningTo put money, effort, or time into the financial schemes, property, or commercial ventures and shares with the expectations of profit-making. It is allocating resources (money) to generate income or a greater payoff than what was originally put in.It is the amount leftover or kept aside after the consumer’s spending is subtracted from the disposable income earned in a given period. This money is put into banks or similar financial organizations after being set aside from the current income.
Types of assetsInvesting is a long-term asset. Investments involve putting money to work or creating wealth to achieve long-term goals like children’s education, buying a house, etc.The interest rate on savings accounts is low, mostly in the single digits. Therefore returns are meagre.
RiskLarger risk of loss.Virtually no risk at all.
GoalOne wants his or her investments to make money.Saving is done to keep an individual’s money safe for later use.
ReturnsVery high potential for returns since publicly traded stocks can double or even triple within a short time.The interest rate on savings accounts is low and mostly in the single digits. Therefore returns are meagre.
Liquidity Liquidity is low regarding investing, as cash has been put into shares or financial ventures.Liquidity is high regarding saving as the cash is in the bank and is easy to withdraw in times of need. Saved money can also be kept at home.

What is Investing?

Investing is the act of allocating resources (money) to generate income or profit. It can also be considered as the money spent by a shareholder to buy shares of a company.

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In economic management sciences, investing equals long-term saving and has the potential for long-term returns.

There are five main investment types or asset classes, each with risks and benefits. They are shares, growth, equity, defensive, and property investments.

Stocks and equity investments are considered the riskiest of the five major investment classes but offer the greatest potential for high returns.

Investing is how one can take charge of their financial stability. It allows the growth of wealth and also generates additional income if needed.

 Investors consider a few factors before making investment decisions: returns, risk, investment time period, taxes and liquidity. Safety, income and capital gains are the three main objectives of investing.

Investing

What is Saving?

Saving is putting away a part of a person’s income for future use. It can also be considered the money left over from an individual’s income.

It is the money kept aside, especially in a bank or financial society, for use in the future or for the flow of resources accumulated this way over time.

Saved money is also kept at home sometimes, but this money does not earn interest in return.

Saving is important because it protects against financial emergencies and helps build wealth. Saving is done for short-term goals.

Examples of saving sources include currency, bank deposits, shares and deposits. Saving also involves reducing expenses, such as recurring spending.

Broadly, it refers to any amount of income that is not immediately used for consumption. In economic terms, savings is defined as taxable income without consumption.

savings

Main Differences Between Investing and Saving

  1. Investment means putting money, time or resources into something to make profits. Saving refers to setting aside a part of an individual’s income for future use.
  2. One can invest in financial schemes, shares, commercial ventures, property, gold, and so on with the expectation of achieving profit. Saving is done to curb recurring expenses.
  3. Investing is how one can take charge of their financial stability. It allows the growth of wealth and also generates additional income if needed.
  4. Safety, income and capital gains are the three main objectives of investing. Saving is important because it protects against financial emergencies and helps build wealth.
  5. Investing is done for the future, while saving is done for short-term goals.
  6. Shares, growth, equity, defensive, and property are investments. Examples of saving sources include currency, bank deposits, shares and deposits.
  7. In economic management sciences, investing equals long-term saving and has the potential for long-term returns, while in economic terms, savings is defined as taxable income without consumption.
Difference Between Investing and Saving
References
  1. https://www.sciencedirect.com/science/article/pii/S0304405X06001127
  2. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1002388
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Last Updated : 11 June, 2023

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25 thoughts on “Investing vs Saving: Difference and Comparison”

  1. The article provides a meticulously detailed comparison between investing and saving. It’s a commendable asset for anyone seeking a comprehensive understanding of these key financial concepts.

    Reply
    • Completely agree, Holmes. The article’s comprehensive approach to dissecting these financial practices is highly commendable.

      Reply
    • Absolutely, Holmes. The in-depth analysis of both investing and saving makes this article an invaluable resource for financial literacy and planning.

      Reply
  2. The article does a commendable job of comparing the risk associated with investing against the relatively safer nature of saving. It’s a valuable resource for anyone looking to strengthen their financial knowledge.

    Reply
    • I couldn’t agree more, Suzanne. The article’s meticulous attention to risk factors sets it apart as an indispensable guide for financial decision-making.

      Reply
    • Absolutely, Suzanne. The article’s focus on enhancing financial literacy through detailed risk comparisons is undeniably praiseworthy.

      Reply
  3. The meticulous breakdown of investment types and their associated risks is commendable. It’s refreshing to find an article that offers such clarity and depth on these financial concepts.

    Reply
    • Absolutely agree, Murphy. The in-depth exploration of risk associated with investments is an immensely valuable feature, aiding readers in their financial planning.

      Reply
    • I share the same sentiment, Georgia. The article’s elucidation on investment types is truly invaluable for making well-informed financial decisions.

      Reply
  4. I found the comparison of liquidity between investing and saving quite informative. The significance of saving for short-term goals and emergencies is underscored effectively.

    Reply
    • Absolutely, Eileen. The article does a fantastic job of highlighting the importance of both investing and saving in their respective financial contexts.

      Reply
    • The article’s detailed focus on liquidity aspects is indeed enlightening. It’s refreshing to see such meticulous attention to key financial distinctions.

      Reply
  5. A highly detailed and informative article that effectively differentiates between investing and saving. The emphasis on planning for long-term goals is particularly noteworthy.

    Reply
    • Absolutely, Taylor. The article’s focus on long-term financial stability through informed investment and saving practices is commendable.

      Reply
  6. The inclusion of the importance of saving for short-term goals and emergencies is an insightful highlight of the article. It’s refreshing to see such a thorough consideration of the financial implications for individuals.

    Reply
    • I share your sentiments, Cwilliams. The article’s emphasis on the multifaceted benefits of saving is truly impressive and conducive to informed financial planning.

      Reply
  7. I wish I had come across this article earlier. It provides a clear understanding of the objectives of both investing and saving, making it an immensely useful resource.

    Reply
    • Absolutely, Patel. The emphasis on clarity and thoroughness is evident throughout the article, making it a commendable asset for financial understanding.

      Reply
    • I couldn’t agree more, Becky. The article’s focus on safety, income, and capital gains as the prime objectives of investing is particularly enlightening.

      Reply
  8. I appreciate the comprehensive approach taken to explain the differences between saving and investing. The article truly succeeds in providing a clear distinction between the two practices, making it indispensable for individuals seeking financial security.

    Reply
  9. The detailed explanation on the different types of investments and asset classes is excellent. The risk factor is explained clearly, and it’s great to see the emphasis on planning for long-term returns.

    Reply
    • Precisely, Millie! The section on investment types is particularly insightful and valuable for individuals making financial decisions.

      Reply
  10. This article clarifies the key differences between investing and saving. I appreciate how it defines both terms and highlights their importance. Extremely useful information for anyone aiming to secure their financial future.

    Reply

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