Why is investing better than saving?

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If you read or watch content related to personal finance, then you would have come across two very common words- investing and saving. So, in this article, we will talk about the main difference between investing and saving, also we will answer why investing is better than saving.

Let’s start with knowing about saving and investing.

What is Saving?
Saving can be understood as keeping aside a part of income for future needs and wants, this is usually to protect one from future uncertainties. For example, if you earn 1 lakh per month, and your needs require 50,000 and you spend 30,000 on wants, you are left with 20,000. And you keep that aside for your future goals and needs.

What is Investing?
Investing is different from saving, the main aim of investing is to allocate a part of your income, generate additional income, and have returns on it. Investing can be defined as the act of allocating resources, to generate returns over it. Under investing the money is put to work, while in savings you just keep it aside. There are many different investment options out there.

Difference between Investing and Savings-
As mentioned earlier, Investing is making your money work for you, while in savings you just keep your money aside. While Investing is an active role, saving is a passive role. If you would like to invest you have to spend time on research, and decisions. While if you save you just keep that money aside, and there are no decisions for you to make. That is why, if you open a bank savings account, then you get a 5% return automatically, and if you save it in the form of cash then you won’t receive that interest, but in today’s time, nobody prefers to store money in cash.

Why Investing is Better than Saving?
1. Investing helps you earn returns, and helps you grow your money. So, your money would result in more money, but if you opt for saving you won’t receive any increase in your money’s worth.

2. Investing helps you beat inflation, the usual rate of inflation is 7% while a savings account would just provide you with 5% or sometimes even low. So, your money is going to lose its worth every preceding year. While investing would help you beat inflation, and even earn extra returns.

3. Investing provides you with extra passive income, this would help you with getting extra income, as well your money would appreciate.

4. Investing helps you achieve your future goals, you can pre-plan your investments based on your goals. But If you just save your money, it wouldn’t be worth the same after a few years, and the price of your goals would eventually increase with inflation.

Conclusion – Overall investing is a way better option than saving. And you should invest your savings rather than just keeping them in the bank.

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