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Terms; Savings and Investments are often used interchangeably. However, both are different. Let us understand.

Saving: Savings is the money kept aside for any purchases, emergencies and paying bills, etc. The most common examples of Savings are, Bank Accounts, FDs, RDs, Cash, etc.

Investing: Investing is a process to put your money into making more money out of it; that is basically a wealth creation process. We put money into different asset classes or financial products which grows with time and earns you returns on your money invested. Some examples of investment products ( financial products or asset classes ) are; Mutual Funds, Stocks, Bonds, ETF ( Exchange Traded Funds), Commodities, Real Estate, etc.

Difference between Saving and Investing:

Both, saving and investing are important in your Financial Planning. However, asset allocation between these depends on an individual’s Financial Goal, Risk appetite, age, current financial state, etc.

Investing has higher potential of return and capital appreciation whereas saving has lower return or almost zero return in some cases. In terms of risk; investing bears some risk compared to saving; which has minimal risk. The access to your money in the form of cash (i.e. liquidity) is lower in investing, but some of the Mutual Funds have better liquidity as compared to other investment options available. Saving has better access to cash in most of the cases.

Decide on your purpose of asset allocation and choose the right amount to set aside for both options separately.
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