Saving and investing can sometimes go hand in hand. Its when they become intertwined that people start to lose a grasp on the differences between the two and they are synonymous terms. Whilst saving and investing are definitely related, it is important to remember they are very different.
What is saving?
In broad terms, the term saving refers to the act of putting money in a safe place with the intention of using it in the future. The UK government’s definition refers to setting money aside without risk and with the option to earn interest. Savings can siphoned into bank accounts, building society savings accounts and cash ISAs, to name a few options. It is worth remembering that people also save for a variety of reasons, including:
- A new home
- To go travelling
- To fund university
- To fund retirement
- A new car
What is investing?
Investing refers to the act of putting money into an opportunity with the hope of making financial gain. Unlike saving, investing comes with heightened levels of risk, however there are different options available to suit most investors.
Investors can put their money into the likes of:
- Stocks
- Bonds
- Funds
- Property
- Investment Trusts
- Art and antiques
Whilst investors want their money to grow, there is a chance that invested money could decrease considerably. The risk is to be understood and accepted by investors. Investors understand that taking on risk could potentially result in them making money as opposed to losing it.
Should I save or invest?
Both saving and investing can help you reach your short, medium and long-term financial goals. Which option is best for you will likely boil down to how much risk you are willing to accept. As mentioned, investment opportunities have more associated risk compared to savings accounts.
If you are unsure as to what action you should take with your money, we would highly recommend you consult an independent financial advisor prior to make an investment decisions.