What is the difference between saving and investing?

Saving is typically for short-term goals with easy access to cash, while investing is for long-term growth with potential higher returns and some risk.

Why should I save money?

Saving helps with pre-planned purchases, provides ready cash for emergencies, earns interest, and offers financial independence.

Why should I invest money?

Investing allows your money to grow over the long term, offers tax advantages, and provides financial flexibility through liquid assets.

When should I choose to save or invest?

Save if you need the money in less than five years, invest for goals over ten years, and consider a mix for intermediate time frames.

Why Save vs. Why Invest: Understanding Financial Priorities

Savings Vs. Investment

S.No	Savings	Investment
1	Short-term: Savings is a short-term commitment. The usage of money saved is meant more for a vacation or an emergency.	Long-term: Investment is a long-term process. Usage of money invested is meant more for planning your child's future education or retirement.
2	Easy Access to Cash: Most banks provide savings account holders with easy access to cash through several portals including ATMs.	Limited Access to Cash: Money invested is not easily accessible. The process is tedious and takes a significant amount of time.
3	Money deposited with banks is considered to be safe as they are regulated by RBI and monitored by the government.	High Risk: Any investment can be lost.

Why save?

Pre-planned: When planning for a car, a down payment on a house, jewelry - saving gives you the liberty of pre-calculating the duration it takes to reach your goal.

Available Cash: Expenses no longer depend on income. Ready cash is available for any unforeseen expenses.

Interest Gains: Several banks have interest-bearing savings accounts that provide small amounts of interest for the money in your savings account.

Financial Independence: Starting a business, switching jobs or moving to a new city - Savings helps smooth-sailing through the transition.

"An average saver will do better than a great investor who doesn't save," says David A. Schneider, CFP professional and principal at Schneider Wealth Strategies in New York City.

Why invest?

Grow Your Money: Investment is a long-term plan. Investing methods such as stocks or bonds offer a higher rate of return on money, allowing you to create and grow wealth.

Tax Advantages: Investment vehicles charge low tax on profit and gains. ELSS is one investment method with zero applicable tax on investment returns.

Financial Flexibility: When money is invested in liquid assets, there exists financial flexibility to buy or sell them during an emergency.

Point to note:

If the money will be used under five years - Save.

If the money will be used after ten years - Invest.

If the money will be used between five to ten years - carefully consider the risks, goals, and expected financial situation during this period before choosing to save, invest, or both.