Saving and Investing

Most of us will be familiar with the phrase “investing for my future” but this can mean many things. Training for a new job can be a form of investment because the training undertaken will hopefully lead to obtaining a job with better pay or prospects in the future.

In financial terms however, although many of us may think that we know what investment is all about, in reality it may well be more diverse and confusing than we first thought.

What is the difference between saving and investing?

Saving – the money one has saved, especially through a bank or official scheme

In literal terms if you set aside some money to use for a specific purpose, to buy a holiday for example, then this is saving. The reason is that it is the capital that you are saving that is of real interest rather than the interest that you may (or may not) earn on the money you put away. Essentially based on short periods of time, the money we save is used to buy the things we want over the short to medium term.

Investing – the action or process of investing money for profit

Investing on the other hand is setting aside either a lump sum or a regular amount of money in an attempt to achieve a profit from either the capital growth of that money or the income received from it, generally over a longer term.