Savings vs Investment: Know the Difference
Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

Savings vs Investment: Know the Difference

Savings vs Investment: Know the Difference
  • 6th Jul 2022 |
  • 3,561

We often hear people talking about savings and investments, their benefits, and how much funds we should put into these. For example, some say they plan to go on a vacation soon with the amount they have “saved”, while some talk about their money making more money for them, which they “invested” somewhere.

Though we frequently use these terms in our day-to-day lives, most of us fail to comprehend the exact difference between them. So, let us talk about savings and investment, what they are, and understand savings vs investments.

What is Savings?

There are primarily three ways to earn money for a livelihood: being employed, self-employed, or running a business. But none of these sources can guarantee to provide uninterrupted income forever. Nevertheless, with a well-thought-of saving strategy, you can make your future financially secure by saving in a disciplined manner.

When earning money, financial experts advise taking out a certain percentage of that amount and keeping it safe aside, which is called savings. This amount can also be termed as your emergency funds. The emergency fund is the essential corpus of money that provides you with a financial buffer during an emergency. Generally, financial advisors suggest taking out 10-20% of your income as your savings and not touching it unless you are stuck in a dire emergency.

The fund in savings should be sufficient to run your expenses for at least three months. However, keeping enough savings to meet 12 months of expenses is recommended.

What is Investment?

Investment is putting your money into an asset that provides good returns, ultimately adding to your wealth. Numerous investment tools are available in the financial market, such as Stocks, Bonds, Fixed Deposits, Mutual Funds, Exchange-Traded Funds (ETFs), etc.

American Businessman and the author of many successful business books, Robert T Kiyosaki, says, “Often, the more money you make, the more money you spend; that’s why more money doesn’t make you rich – assets make you rich.”

The main objective of investing is to put your money to work and fulfil your short-term and long-term financial goals. In earlier times, investing needed a large amount of money to start with, such as real estate or gold, but nowadays, many new investment plans have come up where one can begin to invest with a mere amount in the hundreds.

Before investing, one must consult a financial advisor to help them decide where and how much to invest. In addition, you must consider vital factors before choosing the right investment tools, such as your budget, financial goals, risk-taking appetite, income tax aspect, etc.

Difference between Investment and Savings

Savings vs Investment: Key Differences

The Risk Factor

Savings products usually involve low risk, unlike investment tools. This is because the return on investments depend entirely on the market. Unfortunately, the capital market is volatile and directly impacts your funds.

Goals and Returns

Saving products such as Savings Accounts, Recurring Deposits, Tax-Saving Fixed Deposits, etc., secure your money and provide nominal returns in the form of interest. However, the opportunities to grow and increase the value of your savings are limited here. On the other hand, research-backed investing can earn much higher returns beating inflation and accumulating wealth for you.

Time Period

If you are planning to buy an expensive gadget or go on a vacation, you can meet these goals within 1-3 years of the period. A savings plan can help you fulfil such short-term financial goals. Conversely, if you want to meet your long-term financial goals, which might take more than five years to be accomplished, investing is the right fit for you.

Protection Against Inflation

Since we all know that returns in the savings plan are only in the form of interest, it is not sufficient to beat inflation. However, financial experts believe that wisely investing is the best way to combat rising inflationary rates.

Savings and investments help you save money and meet your future goals. Both have risk factors, periods, returns, investments and advantages. When it comes to financial planning, it is vital to understand the differences between the two and make the right decision.

Savings provide financial security for an unexpected event while investing can offer a high return and secure your life even when your primary income is insufficient to meet your needs, considering the inflation rates. As they say, the right time to invest is right now. So start investing today to secure your tomorrow!

Savings vs Investments – A Quick Comparison

Saving money often means having it on hand when we need it and having little chance of its worth depreciating. Investing often has a long-term goal in mind, like saving for retirement or our kids’ education expenses. Risk is the primary and most significant distinction between investing and saving.

Basis of Comparison

Savings

Investment

Objective

smaller, more immediate objectives

Larger, more distant objectives

Protection against inflation

Protection provided is minimal.

High level of protection

Returns

Stable returns

High returns

Risk

Very little risk or none at all

High or medium risk

Liquidity

High

Usually low

Typical products

Cash, bank saving account, FDs, RDs

Bonds, stocks, equity, real estate, Savings plan and mutual funds

Savings or Investment? Which is the Better Option?

  • Savings and investments are two sides of the same coin. You should decide what is best for you based on your requirements.
  • Investment in savings plans and other options helps you fulfil long-term expenses, life goals, and others.
  • Investing in fixed deposits or recurring deposits and similar instruments helps in fulfilling short-term goals and gives you liquidity benefits.
  • Savings are straightforward and easy to do.

FAQs – Savings and Investments

1. Are Savings and Investments similar?

Savings can also refer to putting money into products or services, such as a bank time account. Spending some of your money to try and increase the value of other assets like stocks, real estate, or mutual fund shares is the act of investing.

2. How much should I keep in Savings vs. Investment?

Savings accounts have the potential to yield substantially larger returns than investing, but this advantage comes with risk, particularly over shorter time periods. You would probably be better off keeping the money in a savings account if you are saving for a short-term objective and will need to withdraw the money soon.

3. What if my savings are greater than my investment?

The projected inventory would drop below the target level if planned savings were greater than the planned investment. The producers increase their output in order to restore the inventory to the required level. More output equals more earnings.

Kotak e-Invest

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

Download Brochure

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

What are the Best Investment Options for Beginners or Amateur Investors in India?

Importance of Portfolio Management

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

Learn About Safe Investments with High Returns in India

Basics of Guaranteed Savings Plan

Early Investing and the Power of Compounding

How to Plan your Investment to Achieve Periodic Financial Goals?

What's Better for Your Child's Education? Child Plans or Mutual Funds?

Why Should You Consider Guaranteed Savings Plan for Long-Term Investment?

Top 6 Investment Plans Available in India

Can ULIP Help in Achieving Short-Term Financial Goals?

Planning Financial Goals and Objectives of Financial Planning

How to Cancel ULIP Policy?

Which is a Better Investment - Mutual Funds Or ULIP?

Benefits of ULIP as a Child Insurance Plan

Customising investments to manage your wealth

ULIP Plan as a Gift

Long Term Savings Plan - Best Savings Investment Plans in India

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

How to Fulfil Your Financial Goals in the Next 10 Years?

Is This The Right Time To Invest In ULIP? Why or Why Not?

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

3 Tips to Buy Guaranteed Savings Plan

Which are the Best Investment Plans for Indian Senior Citizens in 2022?

How Does an Endowment Plan Work?

Endowment Plan vs Fixed Deposit?

What are Mutual Funds?

Complete Savings Plan for Low Income Earners

What is the Importance of Saving Money?

Important Questions You Must Ask Yourself When Buying a ULIP Plan

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?

Safe Investment Options with High Returns for FY 2018-19

What are the Best Investment Options for Students in India?

Different Types of Endowment Plans

How To Invest Money In ULIP?

Top 10 Investment Strategies to Create Wealth

ULIP vs FD - Which is Better and Why?

Investment Options for NRIs in India

4 Benefits of ULIP Fund-Switching Feature

Top 5 Investment Options in 2022 for Healthy Returns

Factors Affecting Stock Markets

How to Manage Inheritance Money?

How Do One-Time Investment Plans Work?

Difference Between Passive and Active Investing

Which is Better – FD, Mutual Fund, SIP, or ULIP?

What are the Best Short-Term Investment Plans with High Returns?

Why Should Parents Invest in Endowment Plan?

What is better - Guaranteed Savings Plan or Fixed Deposit?

How is the Compound Annual Growth Rate (CAGR) Calculated in ULIP?

How to Increase Net Worth Along with Family Protection

Learn About Safe Investments with High Returns in India

How to Manage Your Portfolio Like a Professional?

Difference Between Guaranteed Savings Plan and ULIP

Savings Plan for Grandchildren

How to Plan Your Child's Education - A Step-by-Step Guide

How To Diversify Portfolio In 2022?

Why ULIP is Better Investment for Long-Term Wealth Creation?

Successful Financial Planning for Urban Women

What are the Best Investment Options for Young Adults?

How to Make Your Financial Portfolio?

Are Money Back Policies Helpful? A Complete Guide

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

Planning for Your Child's Higher Education? Explore These Investment Options

Receiving regular payouts at various stages of life

Things to Know Before Buying an Endowment Plan

Creating a second source of income with life insurance

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

What are Deferred Savings Plans?

Short Term and Long Term ULIP Plans for Wealth Creation

What are the Best Investment Options For Females?

ULIP Benefits You Can Avail from Early Investing

Top 5 Principles That Need to be Followed for Wealth Creation

Best One-Time Investment Plans in India

What are Some of the Safest Investment Options in India?

Are Gains from ULIP Sale Taxable?

Best Investment Options to Cover Your Child's Education

ULIP as an Investment for Your Child

How to Plan Savings from Salary?

How Much Wealth Can You Create from ULIP in 10 years?

Best Investment Options in India in 2022

Investments Options to Buy a house in India

What is a Savings Plan and What are is Benefits?

Why Should You Invest in Term Insurance And ULIP?

Building wealth through regular investing

What is ULIP Renewal?

Asset Allocations in ULIP - Know the Top Benefits

How to Start Saving Money in 10 Simple Ways?

How To Track ULIP Performance?

4 Important Tips to Maximize Gains with ULIP Investments

Why Do You Need A ULIP Plan - All You Need To Know

What are Tax-Deferred Savings Plans?