Often people consider saving and investing to be the same, but in reality, these are two different concepts that have different meanings. However, both are very important to make a solid financial plan. Now the biggest question here is how much should one save and how much should one invest. Knowing this can prove to be powerful for you to keep your financial health healthy and secure your future! So let’s understand the deep difference between saving and investing and know what strategy you should adopt according to your financial situation.
Why is it important for your financial foundation
Saving is the process of keeping money aside for future needs. Most people in India save by depositing money in a savings account. The money saved has very low risk and it is liquid money, that is, it is immediately available for any expense or emergency. Saving strengthens your financial foundation and gives you the power to deal with unexpected expenses. It is a powerful habit that makes you feel financially secure.
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How it makes your money grow
Investing means putting money in financial instruments that have the potential to make money or generate regular income over the long term. Some of the popular investment options in India are – Stocks, Mutual Funds, Fixed Deposits, Real Estate, etc. Investing puts your money to work and allows it to grow. It is a powerful way to achieve your financial goals faster.
What is the basic difference between savings and investment
The main difference between savings and investment is the level of risk and liquidity. Investment has higher risk and lower liquidity. The riskier the investment option, the higher the returns. On the other hand, savings are risk-free and have high liquidity, but savings do not offer any significant returns. It is important to understand that risk and returns are interlinked. In the pursuit of higher returns, you may have to take more risks.
How much to save and how much to invest
There is no perfect allocation between savings and investments. However, both are important. How much to save and how much to invest depends on your financial goals, time horizon, and risk appetite.
If you have a need that needs to be met in the short term, it may be safer to save or invest in low-risk options such as FDs or government schemes that offer guaranteed returns. On the other hand, if you have a long-term goal, such as retirement, then you can invest your money in long-term investment options such as shares, and equity mutual funds, as they have the potential to give higher returns and beat inflation. Only by assessing your financial situation and goals can you strike the right balance between savings and investment. This is a powerful way to make your financial future secure and prosperous.
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