The key differences between Savings and Investing

Although many people use investments and savings interchangeably, they are different. Investments isn’t you taking a part of your income and putting it away in a bank to earn little, or no interest.

Below are few differences between investments and savings, that will help you plan your finances better.

What is Savings?

Saving involves setting money aside for future use or towards achieving a goal. Like saving towards a girls’ trip or for kids’ school fees, etc. The aim of saving is to ensure you have funds when the needs arise and that they are easily accessible.

There are many reasons people save - a major reason is, safety of funds. Saving is considered less risky than investing, but one risk commonly associated with saving is inflation - losing the purchasing power of your money.

What is investing?

Investing involves you buying into an asset (i.e., mutual funds, stocks, bonds, real estate, etc.) that will give you a considerable return or income. There are short- and long-term investments.

A short-term investment is any asset you hold for a year or less. A good short-term investment should be stable and highly liquid, giving you access the money. Examples of short-term investments are Treasury bills, commercial papers, money market mutual funds, etc.

A long-term investment is any asset you hold for more than one year. An example of long-term investment is Real estate. Real Estate gains value slowly over an extended period and is illiquid which means that it can be hard to liquidate (or sell), especially if there is an urgent need. Stocks and stock mutual funds are another example of long-term investments, and investors are usually advised to hold long-term. This is mainly due to the volatility of the stock market.

Differences Between Investing and saving
S/N	Savings	Investing
1.	Saving involves setting money aside for future use or towards achieving a goal	Investing involves you buying into an asset that will give you a considerable return or income.

2.	Your funds are easily accessible when you need it.	Some investments have minimum holding periods. In those times you cannot liquidate your investments.

3.	Saving have little or no risk.	Investments span across different risk buckets: low, medium, and high risk buckets

4.	Your goal or objective for saving determines how long you save.	Investing long term yields better returns and can weather market instability.

5.	Example of savings – bank FDs, thrift savings (ajó), etc.	Example of investing – stocks, mutual funds, real estate, etc.

If you would like to know the kind of investor you are, you can click here to take our risk profile assessment. This will profile you appropriately and recommend the best investment solutions that will help you achieve your investment goals.

Please note that it is important to speak to asset managers who are highly trained and skilled in choosing the right investments before you make an investment decision. At AXA mansard, we have experienced portfolio managers who are always available to guide you in making more money.