What is the difference between SAVING and INVESTING?
YES. There are differences.
Most of the time, these 2 were used interchangeably. But the goal are the same. Understanding the difference of the 2 will help you achieve your financial goals.
Setting aside some amount of money so you can use it when needed. Some save it in savings accounts, checking accounts, certificates of deposit, bonds and/or just keeping it in the electronic-fire-safe-heavy-duty-metal-drawer.
Using the money to buy assets with the hope of gaining profit is called “investing”. Investment is not federally insured, you could lose some and profit some.
What are the differences?
- Save if it is for short-term financial goals (like buying a car, for emergency fund, pay regular expenses, vacation and etc).
- Saving is not the answer for long-term goals, consider the inflation rate. It might lose the purchasing power over time.
- Invest for retirement, child's college, long-term financial goal, purchasing lands (that earn. a farm).
It is important to know that Saving and Investing work hand-in-hand. Save for retirement by Investing.