Saving Vs Investment: What to Do and When?

Both saving and investing are two fundamental concepts that you need to be aware of for building a sound financial foundation. Although they both have a positive impact on your personal financial standing they are not exactly the same.

You need to rely on both at some points to achieve a comfortable financial future for yourself but knowing when to choose can sometimes make all the difference in changing the status of your wealth.

The simple and the biggest difference between the two is the level of risk taken. Saving is a more risk-averse approach where you opt for a secure way of increasing your wealth but because it is safe the return is usually low and slow.

Investment is a riskier route but usually has a high return value which means it makes a more visible impact on your wealth and that too in the short term. The risk taken in both these scenarios is the risk of loss. 

How To Save? 

Saving usually means that you want your money to be safe and in liquid form meaning that it is readily available whenever you want to use it. The most common and easy method of saving money is just putting aside some of it every month.

The drawback of just separating it is that it usually stays the same in terms of value or depreciates if the economy is unstable. A better way of saving would be using a savings account in a bank or securities, prize bonds, etc.

The return is a little slow but there is a minimum to zero level of risk involved so most people go this route. A very traditional alternative would be the monthly committee system where a group of people comes together to save money securely based on mutual trust.

How To Invest? 

Investing your money usually requires purchasing an asset with the idea that with time the value of the asset will appreciate and so will the value of your money. The benefit is usually either mid or long-term depending on the type of investment you’re making.

The most common form of investments includes dividends from stocks, value appreciation of stocks, gold, real estate, and more. The most common form of investment in Pakistan however is usually real estate or gold since stocks require some form of education and research since the market is a little volatile.

Real estate has proven to be the most valuable form of investment, especially in recent years as Pakistan’s real estate market has seen a boom. 

When To Invest and Save?

The answer to this question lies in the reason why you want to have more money. If you want to increase your money for something short-term like buying a handset, a car, or a trip abroad then it is better to have a monthly saving schedule either with a bank or with yourself depending on how well you can control your impulses.

If you want to increase your wealth for a more expensive plan like making a house then it is better to invest. Another reason that people invest is that they want to have a second source of income to have continuous input of extra money in their account. 

Why Choose Real Estate Investment? 

Real estate has the potential to bring in more money for you in the future for two reasons. The first reason is the ever-flourishing market which means that you’re bound to make a profit on any piece of land you buy as long as it’s associated with a good project and in a good area.

Another reason is that if you buy property instead of land or develop property on the land you buy, you’re opening up a new source of income for yourself in the form of rental money.

This way your money’s value is appreciated with the land and property appreciation and even without selling it the investment is making you money through rental payment. 

As mentioned before, at the end of the day it all depends on your short-term and long-term goals. You can opt to save or invest based on your requirements as long as you make sure you’re choosing the most reliable and profitable method to either save or invest.