Save or Invest? Hmmm! You wondered what could be the difference between savings and investment and which one should you start with first.
What I discovered is that, most people do confuse both terms for the same thing.
In this article, I will be sharing with you the whole truth about savings and investment.
- What is meant by savings and investment?
- What is the difference between savings and investment?
- Why are savings and investment important?
- How to get started with savings and investment?
- Is it better to save or invest first?
So right now,
You are ready to start your wealth creation journey but you are thinking of what to get started with, whether to save or invest.
Without wasting too much of your time, let me show you the ultimate difference between savings and investment and which one you should go for first.
What is meant by savings and investment?
Savings is an income not spent.
According to smartaboutmoney.com; savings is setting aside the money you don’t spend now for emergencies or for a future purchase.
Savings are money that is quickly accessible when they’re needed. When your savings are in the form of fixed deposits, you may not be able to withdraw as you wish.
It is advisable you save about 20% of your monthly income towards future expenses and emergencies that might bumps up.
The core truth about savings that may be daunting is that-A penny saved is still a fucking penny.A penny saved is still a fucking penny. Click To Tweet
It is a Make Money Certain Scheme which means you will surely get rich if you consider savings only but it will take a whole lot of years (probably 30 years above) before you can create a reasonable amount of wealth for yourself.
Unlike Savings, Investment is totally different.
What does investment really means?
Investment simply means purchasing assets that may increase in value. These assets include; mutual funds, bonds, treasury bills, cryptocurrencies, stocks, and of cause real estate.
Investments usually are selected to achieve long-term goals. They earn you Returns on Investment (ROI).
Investments are aimed at using income/capital to generate large financial gains.
The core beauty of investment is that; it allows you to diversify and have different assets in your portfolios
Also, Investment is a Make Money Smart Scheme which means you are using your money to make more money.
Investment is quite riskier than saving.
What does that mean?
It means that when you invest your money, your money is going out there to work for you so that it can multiply itself in a multiple fold.
And that might be risky.
So if you are planning on investing prepare to be a reasonable risk addict.
“Poor people see a dollar as a dollar to trade for something they want right now. Rich people see every dollar as a ‘seed’ that can be planted to earn a hundred more dollars … then replanted to earn a thousand more dollars.”T. Harv Eker, Secrets of the Millionaire Mind
What is the difference between savings and investment?
There are quite a lot of differences between savings and investment, but let me share some with you here so you can know whether to save or invest:
- When you save your money, your money is still your money, it is going nowhere but when you invest your money, your money goes out to work for you to make more money.
- While savings are on a safe side, investment is on the risk side.
- Savings doesn’t have a return, Investment has a Return on investment (ROI)
- Savings is easier to start with compare to that of Investment, for you to invest you need more knowledge on what you are investing in.
- Savings is a certain and risk-free but slow way of building wealth while investment is all about taking risks and the smartest way to build wealth.
Why are savings and investment important?
You might ask Why is it important to save and invest?
Savings and investment are as important as water and food.
You can’t do without them if you want to embark on the wealth journey. so it’s advisable to know the importance of whether to save or invest.
Importance of Savings
We save, basically, because we can’t predict the future.
Saving money can help you become financially secure and provide a safety net in case of an emergency.
This could be anything; medical expenses, unexpected loss of income or even your children school fees.
To avoid begging around or going into debt when these emergencies arises you will need money to pay for them and the best way is to start your saving journey.
If retiring is something you will be considering, perhaps you need savings to take the place of the income you’ll no longer get from your job.
Importance of Investment
You see! Like I explained earlier….
Unlike savings, investment is all about multiplying.
- Investment helps you create wealth faster and smarter.
- You can invest in assets that offer tax benefits and can save on a good amount of tax.
- You can attain all your financial goals by investing wisely.
- Investment can ensure that you stay financially independent even after you retire.
- Investing wisely in assets like real estate can provide a consistent, predictable, and perpetual income for you to fund your lifestyle.
How to get started with savings and investment?
Sometimes the hardest thing about saving money is just getting started. The following tips for how to save money can help you develop a simple and realistic strategy, so you can save for all your short- and long-term savings goals.
1. Record your expenses & cut out the unnecessary spending
The first step to start saving money is to figure out how much you spend. Keep track of all your expenses (Transport, Bills, household item etc.)
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify nonessentials that you can spend less on, such as airtime, entertainment and eating out.
Once you have done this, organize the numbers by categories, such as gas, groceries, and mortgage, and total each amount
Look for a free-spending tracker app to help you get started. Choosing an app can help automate some of this work.
2. Budget for savings & set a savings goal
Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget.
Your budget should outline how your expenses measure up to your income, so you can plan your spending and limit overspending. Be sure to keep out expenses that occur regularly but not every month, such as car maintenance and electrical bills.
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for; perhaps you’re planning to get a new car, planning a vacation or saving for retirement.
Then figure out how much money you’ll need and how long it might take you to save it. Aim to save 10 to 15 percent of your income.
3. Make saving automatic & watch your savings grow
With technology simplifying things, you can now automate your savings through mobile apps.
Almost all mobile banks and piggy apps like CowryWise app offer automated savings accounts.
You can choose when, how much to deduct from your account so that a portion of every paycheck goes directly into your savings account.
Review your budget and check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly.
Understanding how to save money may even inspire you to find more ways to save and hit your goals faster.
To get started with investing, you need to pick a strategy based on the amount you’ll invest, the timelines for your investment goals, and the amount of risk that makes sense for you.
Is it better to save or invest first?
Now the ball is in your court.
Whether to save or invest it all depend on your income level, risk power, and your hunger for massive wealth.
If you have anything you want to ask concerning savings or investment, or you still find it difficult to decide on whether to save or invest kindly drop your comment in the comment box below.
Because of what I've seen about how a lot of people struggle with fixing & building their own personal economy, I decided to collate some tools and resources that I use and leverage on from top successful individuals to help you boost and manage your economy like the truly successful people. Just insert your name & mail below to get the powerful cheat sheet for FREE!!!