Saving vs Investing

Some may use these words interchangeably but there is a difference in the meaning that we should understand and appreciate. Investing is putting money towards a profitable return whereas saving is setting aside a portion of current income for future use. Saving is great for short term to medium term projects and would even be appropriate for some long-term projects according to personal situations. Investing on the other hand requires a plan.

It is said that an average saver is better than a good investor who does not save. The two concepts go hand in hand but knowing which one to do when is important. How would we know which one is appropriate at a particular time?

When should you save?

• When a return on your money is not as important as the thing you are saving for.
• When you do not have an emergency fund
• When preparing for a big expense or recovering from a financial crisis

When should you invest?

•  When you understand the risk and reward - the chance of higher profits/returns also brings the chance of deeper losses and this assessment must be made and deemed acceptable in advance
• When you want a long-term arrangement, for instance, more than 2-3 years.
• When you desire a higher return than the average bank’s interest.

Whatever the choice, the goal is important. Consider carefully the task at hand, the level of return you hope to generate (if any) and the risk you are willing to take. Make the choice and then reap the reward.