It’s not foolish to say that money plays a huge role in every Pakistani’s life. We are somehow inevitably conditioned to know its worth 💸 Our childhoods are marked by the gift of a tin money box, complete with the smiling face of a popular cartoon character on the front. Later in life, we’re nagged by uncles to save as much money as we can for our old age, or have colleagues try to convince us to “buy mutual funds” (whatever that means) 👀
Don’t get us wrong, the advice from your uncles and colleagues is extremely valid. Being in your teens or your early thirties shouldn’t stop you from building a solid financial plan 💪 However, building this plan requires a clear understanding of the differences between saving and investing. Choosing how to create wealth is a question of choosing techniques that will help you meet your financial goals. We’re here to provide some clarity on the matter, so that you can pick the option that works best for you 🥳
To put it simply, saving is the act of setting funds aside to meet financial goals. You could be saving money for a new laptop, or starting an emergency fund 💵 As you build your savings, the money is closer to being readily available whenever you need it. There is also no risk of the money losing its value.
Investing, however, is the act of putting money into something to generate profit. There are many different ways to invest. You can invest in a venture , like starting your own business 💼, in assets like real estate 🏠, or in stocks 📈 These investments offer you returns, and you can also sell them later at a higher price. Investments are targeted towards more long term financial goals: some parents, for example, invest to be able to afford higher education for their children.
The main and perhaps most important difference between saving and investing is the risk factor. We mentioned that when you save, the value of the money you’re collecting stays the same. With investing, that’s not always the case. People who choose to invest assume that their money will grow over time. Sometimes, though, you risk losing money 😬
Technically, there aren’t a lot of similarities between saving and investing. What brings them together is the critical role they play in shaping a brighter financial future 🙌. Both require commitment, discipline and reasonable financial knowledge. Both also require you to navigate the ups and downs of the economy.
The difference matters because each decision will impact your finances in different ways. Before we get into the pros and cons of each option, we also want to let you know that you can save and invest at the same time if you’re able. The two options are not mutually exclusive – you just need to time them based on where you are in your financial journey📍
The knowledge we’re providing here is basic, but outlines the major differences between two financial practices that have been used by many for years. Past successes or failures won’t necessarily define yours. If you want to save and play it safe, that’s justified. Not everyone has an appetite for high risk. If you want to invest, tailor it to your goals – know Warren Buffet and his investment guru friends capitalized on the right information at the right time to make a plan that met their needs. And that’s exactly what you should do, too 😎.
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