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The pros and cons of saving and investing

In this article, we will see some of the pros and cons of saving and investing. Saving is putting away money in a safe place such as in bank savings account, post office savings, recurring deposit or fixed deposit. Investing is also a form of saving where money is invested as stocks, bonds, and mutual funds or in real estate. Saving is suitable for short term such as accumulating money for the emergency fund. Investment is for your long term needs such as your retirement corpus. Savings will yield very low returns with almost no risks attached whereas investment is capable of fetching high returns and are at the same time associated with high risks. Now let’s see the pros and cons of both savings and investments.

Savings

Pros

  • The main advantage of savings is that it is safe and secure. As long as you save your money in a savings account, fixed deposit or recurring deposit your money will be protected. So you can always be sure that you can get your money whenever you need it.
  • Savings will be very helpful in case of an emergency where you require cash immediately.
  • Savings will help you realize the power and benefit of compounding. With compounding your principal will grow along with current interest and previous interest.

Cons

  • Savings will fetch you very low returns when compared to investments.
  • If you rely only upon saving money for your future, then you will not be able to keep up with inflation in the long term.
  • Savings alone will not be enough to meet your retirement goals once your income source stops.

Investments

Pros

  • Investments help you to gain more returns for your money when compared to savings.
  • With the right amount of investments, you can have a good defense system against inflation in the future.
  • As investment helps you to multiply your money, you will be able to build a good retirement corpus that can cover you even when there is no other income source.

Cons

  • The investment market is highly volatile and fluctuating. So, it has high risks associated with it.
  • Investing money requires some amount of research to make the right investment at the right time. So, this can be complex and difficult for some people.

 


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