What are the differences between savings and investment?

savings and investment

Is it better to save or invest? This is one of the first questions that comes to mind when making decisions about our money. Sometimes it seems that these two terms are synonymous, but the reality is that there are important differences between saving and investing. Each of these options has its purpose. Understanding the advantages and disadvantages of both alternatives will help you make better decisions for your financial health. In this post, we will explain to you what the differences are between savings and investment and the risks of each one. Keep reading!

Save: protect your money

Saving is a good option, at least it is a fairly general idea. This practice involves reserving a part of your monthly income and saving it in a savings account or checking account so that month by month you reserve more money and the total amount in said account grows. This way, you have the security of having a financial cushion in case of emergencies or in case you want to make large purchases (without having to resort to loans). 

Save: protect your money

Here are some of the key features you should keep in mind to save :

Advantages of saving

  • Security. Saving gives you personal security and peace of mind because you have capital that you can use for unforeseen expenses or emergency cases. 
  • Accessibility. You can access your money at any time without restrictions or limitations. You can use the money that is available in your account immediately.
  • Low risk. The risk associated with saving is minimal. Your savings are not subject to market fluctuations and therefore you are not exposed to significant losses.

Disadvantages of saving

  • Low profitability. Saving is a safe option, but (depending on the bank where you have the savings and the type of account where you have it deposited) they usually have no remuneration or are very low. This means that, over time, inflation could erode the purchasing power of your money. Or that the income generated by the interest paid to you, if any, is insufficient to achieve long-term financial goals, such as retirement or purchasing a home.

Invest: produce more money?

Unlike saving, investing involves putting your money in assets or financial instruments to obtain a higher return than saving, but it also means being willing to take on greater risk. Additionally, when investing you should consider whether your financial goals are short, medium or long-term. 

Invest: produce more money?

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