Savings and investments are two distinct things. Although the two are used interchangeably, they are not the same.
Savings are the amount of money you set aside for future purposes while investments are the money you set aside for future purposes but with the main aim of increasing returns and amassing more wealth after a later time.
Purely, financial goals and the level of financial operation determines what to do—save or invest? Findings show that savings may worth less due to inflation, but investments can cover their price. Investment is a form of money that aims at earning more, so if you are looking forward to earning more than what you are saving for, then investments are the better option.
What distinguishes investment from savings, and what makes investment better? Here are 9 benefits of investment
1. The Returns on Investment are Large
The returns on investment—although not too quick—are capable of increasing financial stability. Investing gives you an edge over savings in that products and market goods you invest in will rise, hence, increasing returns.
2. Investment is a Better Option for Future Purpose
If you are considering an enormous project in years to come, investment can cater to it. The period of investing can be as long as 15 years thereby creating an avenue for future planning.
3. Investment is Illiquid
Investment is illiquid unlike savings in that you cannot tamper with it until after a later time, say years. With this, a better opportunity to save for a longer period is availed in investment unlike in savings.
4. Money in Savings can Easily be Touched
Whereas, one can easily reach out to a savings account whenever and deduct from savings to cure a debt to pay for a purchase there is no such opportunity in investment. This is positive because it prevents careless spending.
5. Savings Give Room for More Savings Than Investments
Savings are called savings after disposable income is deducted from income. This means more spending unlike investing. In savings, additional costs on other household products are catered for first before being saved.
6. Investment Beats Inflation
The rate of inflation is extremely high, and the cost of inflation is rising steadily. Therefore, low returns on savings may not be able to cover up inflation prices but the returns on investment can beat up inflation prices.
7. Investment is a Form of Asset
In investment, you can boast of having property or land. Examples of assets can be stocks, bonds, mutual funds, etc. The Short-run and long-run benefit of investment is ownership of assets.
8. Investment Creates More Financial Opportunities
Financial opportunities like securing a loan are high because you have an asset that can be used as collateral if you are unable to pay. Investment can give you a wider outlay of benefit from bigger investors.
9. Financial Goals are Achieved with Investment
If you must set long-term financial goals, investment is the best tool. Long-term goals like wedding, retirement, graduation ceremonies can be catered for with investment.
Investment is the means of furthering financial goals and strengthening financial strategies. Short-term goals are better achieved with savings but long-term goals are realizable with investment.
Although investment comes with bigger risks, the returns on investment can be an incentive to invest without hassles.