Sep 01 2010
The Difference Between Saving and Investing
At present, it is well known to all that to maintain healthy finances is very important to save and invest our money. However, common usage of terms, it is often become confused and therefore not knowing well whether we are complying with both strategies or not.
What is saving?
When we save, we mean to spend less money than we earn. It’s as simple as that. If each month receive $ 10,000, which spent $ 7,000 in basic needs, $ 3,000 that I can spend on other things or I can save. If I decide to save them, then I’m saving.
Saving is the first good habit that we have, allowing us to have a background and not live a day. However, does not mean saving money and grow our investment is where enters the picture.
What does it mean to invest?
Investing means putting to work the money we saved, in order to multiply.
Saving is the first step, since it is necessary to have a section of money before they invest.
The investment has endless facets: there are those who invest in bank instruments, those who opt for investment companies, who enter the stock market, who buy currencies or metals, land, buildings or durable goods, in business, franchises, and so on.
Why is it important to distinguish the savings on investment?
Knowing how to tell if we are saving or investing is important in that it allows us to design an effective financial strategy, according to our needs.
If we have a savings account, which we entered on a monthly surplus of our revenues, we can not say that we are investing. But if we are not aware of the difference between saving and investing, it’s easy to get confused and forget that there is the option to invest.
Benefits and Risks
Although both financial strategies are desirable because they involve different actions, they also carry different risks and benefits.
* The first advantage of the savings is that, unlike investment does not involve financial risk. Since it is simply spend less than we earn.
* On the other hand, as the saying goes, “who no gain” thus saving, being risk free, also free of profit. In order to increase our capital investment is needed.
* Another advantage of the savings on investment is that the former are always available, while the majority of investments have to wait some time to make use of money.
* However, saving money remains static and long-term failure to invest in anything may lose its purchasing power due to external factors such as inflation or devaluation.
Finally, we can not say that a strategy is better than another; it will depend on each person and each family. The only certainty is that before you invest, you need to save.
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