The Nature of Investing and Saving Money: Difference and Similarities

No matter where we came from or how we were brought up, money always be one of the things that is either needed or mentioned. In this modern community, money have become an item that is so important, you are literally considered dead when you don’t possessed money. Money has been used for decades and centuries as the medium for bargaining and selling. We used money to buy things, such as foods, clothes, shelter, accessories and almost everything. However, due to the increasing life cost, the community members are burdened to collect and gather a large amount of money just so they can get by in everyday lives. Despite live cost is still increasing, the earned money is sometimes not enough to support them, especially those who has extra mouth to feed. To overcome this situation, lots of people has started saving their money and there are also those who invest their money. However, it is still debated which method: either saving or investing is more profitable or at least has higher success rate. To find out about the effectiveness of both methods, some surveys and experiments have been explored for this essay about investing money. Their results had shown that despite that saving and investing both have different methods and requirements to be conducted, there also seem to be similarities between the two.

Investing and Saving Money: What is the Difference?

The definition of saving is basically setting aside a certain amount of money and not use it for everyday cost. The methods are usually by saving certain amounts from the earned money into an account whether bank account or checking account. The requirement for this method isn’t really hard to complete as almost everybody can saves the money that they have. Not just a white-collar can save but also students and kids who didn’t even have their own income yet can do it. Students and white-collars usually saved their money by cutting on their wants such as cigarettes, games and etcetera. The usual method of saving is by preparing a jar or piggy-bank to keep the money that is intended for saving. The risk of saving is also not as serious as investing as it only involves the person that owned the money and it wont risk losing all the save money, however it also will not increase the amount that is saved by itself unless the person himself adds more money into the account.

Investing on the other hands is to make your money works for you. To put it simply is to buy assets or goods that will not be consumed the same day as it was bought but will be used in future times to generate income, or the assets will be sold in the future for higher price. As it sometimes requires a large amount of money to invest, only those who already had a source of income can invest, however those without any income sources may also invest by using money or sources that’s loaned or borrowed from others either their own parents or family. Investment also doesn’t specifically required money as any forms of assets or belongings to generate your own income. We can also make investment by giving money to companies or enterprises, and they will use the money given to raise their profit, and part of the profit will belong to the investor as part of the investment. Unlike saving money, investing money had quite a number of risks, and the prominent one is to lose all of the money that is invested due to bad decisions making during investing process. Since investment does relies on risk, it is recommended that the investor went through every stocks, bonds and mutual standing and try to understand it completely before making any decisions to avoid losing all the money that you have put into investment and in turn return at least enough money for you to keep going for a long time.

As it is mentioned before, savings doesn’t really increase the amount of money that is saved in your account. The interest that is offered by the bank may somewhat increase the amount by a tiny bit, however the amount does not really have much change to it as when it first started, unless the owner of the account adds up the amount themselves. This is mainly due to the fact that savings are more towards the short-term usage. The saved money in the accounts are mainly used for emergencies and when there a not enough money for certain things and are not to gather or collect wealth. This also leads to the facts that saving does not have much risk as investing does since the money doesn’t really moves around and used but rather is kept safe without being used for a period of time is gradually increased.

Investment are mainly for long-term uses and is mainly to gather wealth rather than to just be an emergency money. The money will be moved around and is used whether by your assets or by the company that you invest in, to gain more profit and income and thus will increase the amount of wealth that is already possessed. The company will usually use the money that is invested to cover for their operation cost or to make new products and the profit that is gained will be shared by the company and the investors. This however, will results in a number of risks as the money or assets may not generate enough income and thus may result in decrease in money or worse may lose all the money invested. Without proper understanding of how the money flows or how the stocks, bonds and other related works in the investment world, one may find itself making a terrible mistake due to his or her own incomprehensiveness of the investment scheme, and thus will conclude to getting money less than the amount that is invested.

Despite having quite an obvious difference, the idea of saving and investing also have similarities between the two of them. And the most prominent one is the fact that both of the method may return the amount of money that is saved or invested and might also increase the amount if not in a large quantity. They also possessed the similarities of which the usage of the money is for future uses and not in the moment purchase or spending. The other similarity that is obvious is that both methods can help you financially secured and provide safety net in case of urgency.

Conclusion

All in all, despite having their own differences, saving and investing are actually related in many more ways than it is. Since you practically require a massive amount of money to start your own investment, you first need to start saving your income and use the collected money to start investing and try to multiple the amount that you have. This also conclude that both saving and investing has their own risk at play even if not at the same length, it still possessed some risk to the money owner. And to avoid such risk from happening, it is also recommended to study thoroughly and understand all of the concepts and works of how saving and investing is working and not just focus on the outcome of the methods but also try to get interested in everything that is happening behind the scene so that we can analyze everything that happened and make use of all that knowledge that is gathered to try and construct new plan of steps to avoid the same mistake or losses and perhaps use the understanding to gain more advantage than the previous investment. It can be concluded that saving and investing does have similarities between the two, as it was mentioned above such as the reason or factor that may start the desire to save or invest money. The time frame for the two of them however did not share the same similarity as they both return the profit or show their results in different time span. With that information in mind, we can say that both saving and investing actually kind of require each other for each of them to produce a profit or at least return the amount. As a person who relies on monthly income, it is better if the person saves money first, and keep on collecting and at the same time gather more knowledge in investment world from any experienced investor or gather information from companies or enterprises that may want investors or that want to sold their share, stock or bonds. The person may also inquire the information from government related facility as the government nowadays also urge their community members to start on investing to boost their economic growth and thus will be able to support the country for a long run. After the amount gathered is enough to run for quite a time, only then is recommended to make investment based on the best decision that is made by using the information and helps given. 

References

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