What's the difference between saving and investing?

Financial Planning, Regular Savings, Tax-free Growth

What’s the difference between saving and investing?

4 Nov , 2014

Question: Is there a difference between saving and investing money?

Answer: Absolutely!

There is a subtle but effective difference between saving and investing your money, although both are necessary when creating your financial plan.

Saving money is simply about putting money aside on a regular basis. The chances are that you spend less money than you earn, especially here in Vietnam, meaning that any surplus gets put in the bank. This should be a natural step in your monthly budget.

Once you have a healthy amount of surplus sat in the bank, you can start investing some of it. Investing is the way that you can start to get your money working for you instead of the other way around.

Ultimately, if you leave sums of money in a savings account, the amount of interest that you receive will be negligible. However, if you invest small amounts of money into mutual funds or stocks, your interest rate will be much higher. You may even get to a point where your investments make more that you are contributing each month.

It is still important of course, to leave some money in the bank as an ‘emergency fund’, money that is not invested so it can be accessed at any time. Your bank will often have accounts that offer a better rate of interest than a standard bank account, but will also allow you to access the cash at any time without penalty so it is worth researching the best rate you can get.

With your investment, it is crucial to ‘spread the risk’, and a mutual fund is the simplest way to spread your risk well. Within a mutual fund you will have access to different stocks, locations, currencies and industries, meaning that you can spread your risk across the board with very little effort.

That’s it, your first step into investing really is that simple. Start budgeting in a way that allows you to save, and then you can begin investing.

When you are ready, consult with an advisor. Our advice comes free of charge and without obligation.

Financial Planning, Investments, Regular Savings