Saving vs Investing – Do you “save” money for your future? When you go shopping, are you “investing” in a new hand-bag? Weirdly we use these words interchangably, and in my opinion, incorrectly. No wonder the world of money is confusing!
In my mind, saving and investing are VASTLY different, and when you understand that, it becomes much clearer about what to do.
And before you read on, I have a FREE ebook you can download that helps you to understand how to invest at an even deeper level. Visit this page to download your copy.
The meaning and origin of words is actually pretty fascinating. It’s only when you uncover hidden or previous meanings that the word makes sense for the context in which you use it.
So let’s look at the meaning behind Saving:
c. 1200, “to deliver from some danger; rescue from peril, bring to safety,” also “prevent the death of;” also theological, “to deliver from sin or its consequences; admit to eternal life; gain salvation,” from Old French sauver “keep (safe), protect, redeem,” from Late Latin salvare “make safe, secure,” from Latin salvus “safe” (from PIE root *sol- “whole, well-kept”). From c. 1300 as “reserve for future use, hold back, store up instead of spending;” hence “keep possession of” (late 14c.). – https://www.etymonline.com/word/save
Hmmmm….so to save money is to protect ourselves from danger and to create a store of money for future use. Good to know, and perfect for where I think saving comes into it.
Let’s Look at Investing:
late 14c., “to clothe in the official robes of an office,” from Latin investire “to clothe in, cover, surround,” from in “in, into” (from PIE root *en “in”) + vestire “to dress, clothe,” from PIE *wes-(2) “to clothe,” extended form of root *eu- “to dress.”
The meaning “use money to produce profit” is attested from 1610s in connection with the East Indies trade, and it is probably a borrowing of a special use of Italian investire (13c., from the same Latin root) via the notion of giving one’s capital a new form.
So investing is quite literally – “to clothe money in a different form”. This is perfect for what I think investing is by comparison to saving money!
Saving money is for EMERGENCIES and SINKING FUNDS (savings like house deposit, weddings etc). Money that is saved is generally easily accessible, particularly in the case of emergencies and the f*** off fund. You need it quickly, so there’s no point having it tied up into an investment account that isn’t flexible.
Investments go up in value, but they also go down in value. So investing money that you’ll need within the next 5 years is very risky. How do you know if it will hold it’s value? What if it doesn’t?
So when storing money for use on something you need or want, and you don’t have years and years ahead of you (5-10+), then stick it in a basic savings account. You can move money around to gain better interest rates, but that’s essentially it. Don’t use up your tax-free ISA limits on savings. Reserve that for investing.
Money that you don’t need for many years is perfect for investing. By investing, you are transforming money into an ASSET that will bring you income in the future. I’m talking about stocks and shares, index tracker funds, investment properties etc.
By investing money, you are giving it opportunity to grow in significant value. This is something that savings lack.
But once money is invested, it should stay there. What you invest in will change with time, especially as you near retirement, but it should be left alone. Once it’s in, it’s in!
And investing DEFINITELY isn’t buying a handbag or a pair of shoes. Just don’t even go there!!!
Saving and investing are used interchangably, and this is confusing. We often say that we’re saving for the future, but instead, we should be INVESTING for the future and SAVING for the present. If the money is needed soon, it’s saving. If it’s needed later, it’s investing.
I hope that’s given you some clarity of distinction! I’d love to hear your comments, so you can do that here, or you can come over to my free private Facebook group!
Until next time,
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