Saving and investment are similar yet, a lot different. Both saving and investing entail keeping some money for future purposes but, they have some differences. Saving means setting some money aside to purchase something in the future or for emergencies. Investing, on the other hand, means allocating some money into an asset in order to gain more returns.
Savings and investments usually have similar purposes. They are both for the future. You can save or invest for your children’s upkeep, medicals, or to make a future purchase. However, there are a few differences between both of them. Here are a few differences between savings and investment:
Generally, investments have a higher risk compared to savings. In some cases, a person can lose all their funds in the wrong investment. Savings, on the other hand, has zero risks involved. The money kept aside is safe. The only risk in saving is inflation. Although the risk involved in investments is higher compared to savings, there are still safe platforms like Sycamore that offer high returns and zero risks involved. More often than none, people invest in multiple platforms. When investing in stocks, you can gain up to three times your investment or lose your investment.
Another difference between Savings and investment is the interest rate. Savings generally have a low interest rate. In Nigeria, the interest rate of savings accounts is 1.25% per annum in 2021. Investment returns can be from 10% to 300%, depending on the platform and the risk involved. If you want to gain more returns on the money you’re putting aside, the investment will be the best choice for you. If you’re saving at home (keeping money in a ‘kolo’), there will be no interest attached to your savings. The interest rate on investment and savings is a huge difference between them.
Savings are usually for short-term goals. It could be for a couple of months to 1-3 years. You can save to get a new phone or for an upcoming vacation. Investment is typically for long-term financial goals. It could be for your children’s education/ upkeep (when you don’t have a kid yet), a wedding, or for retirement. Great investments are done for five (5) or more years. Although there are investments for 6 to 12 months, investment is typically done to help achieve long term goals.
Access to Money
At a critical time, you can easily access your savings. Generally, savings are a form of emergency funds. When you need money desperately, you can easily withdraw a part of your savings. Investment, on the other hand, is typically hard to access. When investing, there are contracts involved that make it difficult to withdraw your money before the stipulated time for withdrawal. Some investment platforms may allow you to withdraw the invested amount before the due date, but you may lose some part of your interest. Investments are for long-term goals and as such, shouldn’t be withdrawn before the due time.
Having both savings and investment is essential in attaining financial success and stability. You should always have some savings that can be used if an emergency arises. You also need to think about your future and invest some part of your savings. Although Investments give better returns than savings, both of them are essential to your financial life. To start your investment journey, visit www.sycamore.ng today.