Savings and Investments

Olivia Nickoloff

The Difference Between Saving and Investing

Saving is a portion of income not spent on consumption. Savings are typically used to pay for emergencies and/or large purchases. They provide foundation for financial security. Investing is the purchase of assets with the goal of increasing future income. This is used to pay for long-term goals, such as retirement or higher education and helps build wealth. Saving also allows more liquidity, how quickly and easily an asset can converted into cash, where investment has less liquidity.

Reasons to Develop a Savings Plan

Savings plans are important and necessary in order to be financially stable and organized. They are strategies for putting a portion of money from current income aside, which will not be spent on consumption, in order to reach a certain goal. Some of the reasons these savings plans should be developed are:

  • It's easier to prepare for expensive payments in the future (ex. car, college)
  • Eliminates reckless spending
  • It allows more time to store money
  • It keeps money from being spent without you knowing it
  • They provide you with a clear mind to set your goals