Savings and Investment Definition, Relationship, Difference, Importance

Posted by Guest Author under Investing on July 8, 2016

A guide about savings and investment definition and its importance. Know the difference between savings and investment today and their relationship.

Do you know that when you just saved, you didn’t invest? And the chance of making your money grows very fast is very slim. What is the difference between saving money and investing money? Many people do just know how to save. But only few people knows how to invest. That’s the reasons why there are few rich people compare to the numbers of poor individual.

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Today, in this short personal finance and investing guide. Let me share to you some basic information about “savings and investment”.

Savings and Investment Definition

Saving money is setting aside a specific amount of money daily, every week, every month or every year. Saving money can be done at home, office or in the bank. The traditional way of saving money is by opening a savings account in the bank and make a deposit (funds) regularly.

Related: Ultimate Guide to Save Money for Beginners

While on the other hand, an investment is a thing that generates money. Investing is the process of buying valuable things such as stocks, real estate properties, bonds or even mutual fund shares. Investing can be done in a investment companies that governs by Securities and Exchange Commissions.

Related: How to Start Investing Money

There are different types of investment you can choose such as stocks, bonds, real estate, mutual funds, business enterprises, gold, art, collectible, oil and gas, etc.

Savings and Investment Definition, Relationship, Difference, Importance

Image Credit: Images Money via Flickr on CC 2.0 — Savings

Importance of Savings and Investment Relationship

The relationship between savings and investment is very important. If you are trained to save money, investing money will be very easy for you. In saving money, discipline is very important. And so in investing, discipline is more important.

Clue: If you know how to set aside money to prepare your financial future through saving, investing money will be very easy for you. You can’t invest money if you didn’t decide first that you need yo save.

Why Savings and Investment are Very Important?

Savings and investment are very important to help you prepare your financial future. Saving can help you teach how to spend your hard-earned money wisely because you will realized that despite of working hard, you didn’t yet saved any amount until this time.

Investing money will help you accumulate money fast compare to savings. Imagine if you invest in stocks that earns almost 7 percent per year. Do you think it can beat by the savings account wherein the interest earned is very low?

Recommendation for beginners. You need to learn personal finance education first. Know how to save money, how to increase your income, how to spend money wisely, how to budget your income, etc.

Before you invest, analyze your current financial situation. Improve your financial situation. Get out of debt. Build emergency funds, buy health and life insurance and lastly, you need to create an investment plan with objectives and purposes.

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