Savings account vs investing, the two always interchange, but the truth is that there is are differences between the two financial words.
This is actually the purpose of this blog post, letting you know the difference between the two.
In the Financial industry, savings and investing are one popular services that financial institutions gives to their customers, they seemed to mean the same but in the real sense, they don’t.
Savings account vs investing in 2020.
Let’s me give you an insight on the difference between savings account vs investing account.
Savings account vs investing: Knowing the difference
When you say savings, it means saving money (cash) for the future use, and which is always available on demand.
For Investing, it involves the process of saving money for a specific period, be it on long or short duration in order to gain high interest rate and money isn’t always available on demand.
You can say that an investment is an asset or item acquired with the goal of generating income through interest rates.
It is the process of using one’s money or capital, to buy an asset that has a good probability of generating a safe and acceptable rate of return over time be it short or long run.
Savings account vs investing.
A good example of investment account is the fixed deposit, treasury bills, stocks, mutual funds etc.
All these has a tenor from thirty days to one year with a good amount of interest on any amount fixed with any financial institution.
In investment, immediately an investor invest a certain sum amount of money into his or her investment account, he or she is not liable to request for the money until maturity.
When i say maturity, it means the date to which the money will be paid to an investor or you can also say that it is an agreed date that the full amount on a loan or bond must be paid to an investor.
Many bank customers do complain about savings account having a low interest rates, well this is where the investment account pays off.
It actually do have a good interest rates though it depends on the financial institution one is investing into.
Investment account have have tenors which ranges from call, one month, three months, six months and one year, whilst it isn’t applicable with savings account.
Money saved into a savings account remains there forever until the bank customer withdraws the money.
Requesting or demanding for money invested into an investment account before maturity attracts a penalty which can take a huge sum amount of money invested.
This isn’t the case with savings account.
A bank customer can request for his or her money at any given time as it is always available on demand.
Investment is made to provide returns and help in capital formation, while savings account is made to fulfil short term or urgent requirement.
Like i said earlier on, investment generates a very high returns, though it differs from bank to bank, while it isn’t the same case with the savings account.
A savings account tends to have a high rate of liquidity, while investment account seemed to be less.
When i say liquidity, it means how easily assets can be converted into cash. Assets like stocks and bonds are very liquid since they can be converted to cash within days.
Savings account vs investing in 2021.
Generally, you can say that savings is setting aside a sum amount of money, into an account for the future use, while investment on the other hand is the process of putting funds into productive uses.
Another good understanding of the difference between savings account vs investing is the main reason we create the two accounts.
We save to meet up with unexpected expenses or unforseen circumstances that requires money.
While investment are made to generate returns over the period that can help in capital formation.
Savings account vs investing in 2021.
In terms of having low or high risk of loss of money, i will say that savings account tends to have low risk than the investment account.
Investing into a non bank financial institution tends to increase the risk, in the case of bankruptcy or the financial institution collapsing.
Another difference between saving vs investing is that in investment account, the amount of money required to open an account is lot higher compared to the savings account.
For example, you want to invest in the treasury bills or fixed deposit, and you are required to have a least minimum amount of one hundred thousand to open an investment account, whilst savings account is just one thousand naira.
Investment accounts in terms of treasury bills has dates which an investor can invest into, while it isn’t the case with savings account.
Benefits derived from savings and investing
Savings accounts helps a lot in terms of money transfer or bills payment like utilities.
This in turn helps a lot to promote cashless system in a country.
Savings and investment account helps in reducing excessive money spending.
When you save or investment money, and don’t keep it at your reach which is probably your office, house etc, you tends to save a lot.
Savings account vs investment helps your child’s financial future in the case that you open an account for your child or maybe invest cash for their future use.
Having an investment account gives a good interest rate, savings account tends to have little or no interest.
Investing products can be very liquid, with stocks, bonds and funds being easily convertible into cash on almost any weekday.
In terms of savings account, your funds are still readily available at your demand, though such can’t be said for investment account.
Savings account and investment account, your money is kept safe and you need not fear for any loss even in terms of robbery.
Investment accounts give one the potential for great investment returns.
So that’s it on savings accounts vs investing. Please don’t forget to use the share buttons to share this post.