It is quite common that, in certain situations, savings and investment are used as synonyms that, although not bad, this has come to confuse many people, making them believe that these practices are the same thing. Therefore, we will point out the most marked differences between both practices, so that they can understand them once and for all.
Savings and investment objectives
Although, both in savings and investment a person reserves part of their money, each one has a completely different reason to do so. While an investment is sought that this initial amount is multiplied in the long term using special tools for this, while savings is dedicated to maintaining this money saved to use it in time of necessity or emergency.
Risk level
Because the only purpose of savings is to have money reserved to meet certain goals, the possibility of losing it is zero, unless you opt for a deposit that can multiply the initial deposit, but even this way this possibility is quite distant. For its part, one of the requirements for an investment to generate more income is to assume certain risks with the expenses made, so, although this depends on the product, there is a greater possibility of losing your money.
Typical financial and investment financial products
The tools associated with savings include deposits in specific installments, accounts in paid sight and savings notebooks, all designed especially to help maintain the stay of the deposited credit and increase their profitability. Meanwhile, the investment opts more for fixed income, investment funds, variable income or derived funds.
Time horizon
Although in savings, the time that a person maintains this practice can vary, in general it is usually carried out in the short term in order to fulfill a goal. This does not happen with the investment, where the majority of goods or services that request the credit of this type require a specific period of time, giving you less freedom, being much longer than that of savings.
Liquidity
In general, people who seek to save deposits in bank accounts, which causes the credit that keeps and generates a great liquidity, being able to turn it into cash at any time of the day without many inconveniences, unlike investment. Mainly, the liquidity of the investment depends on the good or service in which it is invested and the payment method, but usually this is very little liquid.
Performance
“Performance” is known as the compensation obtained by the money that is saved. Therefore, it happens that savings yield is quite low, or completely null in certain, since no activity is being carried out with it, while the investment yield is quite high when financing certain goods or services is financed, although it can become imprecise depending directly on what is being invested.