Saving Vs Investing- The Key Differences

People often use the terms ‘’Savings’’ and ‘’Investing’’ interchangeably, without reflecting much on their differences.
The terms are not the same.
They are as opposite as lock and key.
While the ultimate goal is the same, providing financial security, they individually work in distinct ways, carrying distinctive features.
Savings, in many sorts, is a prerequisite of investment.

The only similarity is the shared objective in growing your money and putting you under the umbrella of financial protection when times get rough. This, in no way, undermines the importance of either.
While they are not the same things, both are equally important if you want a secure, more comfortable, and worry-free future.
If you have not been practising either, it’s a good time to start now, with little changes in the way you spend, monitor, and utilize your income and these few simple steps:

  • Set Saving Goals
  • Go Easy on Groceries
  • Create a High Yielding Savings Account
  • Automate your Savings

It might sound like a huge change, but you have got it!
It is also vital to let go of the fabricated idea that to save or to invest; you need a decent amount of cash in your hand.
While this is true to some extent, it is possible to start young, with little money as well.
Your financial attitude matters more than your financial status in determining the amount you can save and invest to reap its fruits later when you want to live a peaceful and contented life without the hassles of money worrying you every night.
It is possible, and we will show you how.
But before we start on the differences, it is always a good idea to be clear of all notions where the money is concerned. And to have a more profound approach as to:

  • when and how to Save
  • And when and how to Invest.

Let’s have a quick look at this.

When and How to Save

Generally speaking, savings are the amount of money you have put aside with a short-term plan of some major purchase, repair, or an emergency event.
It typically means that the money will be available to you in your time of need and generally has a very low risk of losing value over time.
We save when we have met all our necessities and paid all our bills.
That extra amount left can always find its way in our piggy banks instead of spending on luxuries.
That’s a choice you can make deliberately.
Remember, the only hard thing about saving money is getting started.
You don’t have to begin with a handsome amount of cash in your hand. It’s a false conception that keeps us from saving timely.
If you put your mind on it, you can save from any amount you have.
Everyone’s way of saving can be different.
For some, it may begin by cutting the number of their monthly dine-outs, while others might be holding back on an exotic family vacation to save up. Few might even be saving up to have that family vacation.
Whatever your goal is and whatever your ways are, you can save!
Here are a few simple yet effective ways to save money:

Set Savings Goals

One of the easiest ways to start saving money is to set a goal and visualize it every day.
Let the temptation of what you want to with the money become the driving force.
For example, you want to buy a new car by the end of next year; you have up to 24 months to save.
You can easily divide the amount you need to save every month with the timeline and goal already set.

1. Go Easy on Groceries

Groceries are where we easily let the money slip.
Tempted by those stacked aisles of Oreos and Chips, grabbing unnecessary things just because we saw them and suddenly felt an urge that we need them. Avoiding this can save you a great deal.
Check your pantry before leaving. Even better, plan your meals and make your grocery list before you step out.
Try to stick to your list as much as possible. Avoid visiting aisles that you don’t need anything from.
You can even give ‘’grocery pickup’’ a shot if you are easy prey to your temptations.

2. Create a High Yielding Savings Account

Keeping your savings account separate from your regular checking account is a clever idea.
It also helps to reduce your chances of borrowing money from your savings account from time to time.
If you want to maximize your returns, creating a high yielding savings account is an even better idea.

3. Automate Your Savings

If you are not consistent with Savings, Automation can do the trick for you.
It is the most effective way to save, even before you begin spending.
Schedule your automatic transfers, for example, around the time you receive your pay.
It means that you have a process in place to save at regular intervals with any snooping from your end.

4. Others

While these are only a few, most productive ways to keep your money aside, countless ways can help too, find out what works the best for you from the following:

  • Unsubscribe from unnecessary, automatic subscriptions and memberships
  • Say Goodbye to any Debt by paying off your monthly debt payments. Sounds intense, right? Try the Debt snowball method, starting from lowest to highest debt.
  • If the necessity is one time, just Borrow instead of buying.
  • Pack your lunch for office and cut down on monthly dine-outs.

When and How to Invest

On the other hand, investment is a way to potentially grow your money by buying financial products like stocks, bonds, mutual funds, ETFs, property, etc., and hopefully sell them at a higher price to gain a budding profit.
Now, one thing is for sure,
If you want to become rich and see your wealth bloom, saving alone is not enough.
You have to take your shot at investment.
Again, you might be thinking, should I start investing already? Do I have enough? What about my job, what about my savings?
Just take a deep breath and let this sink in;
Just have faith and take that plunge.
Investment always comes with risks.
It’s your call about how much you can afford to begin with.
There are few things extremely important to consider before you should invest.
Ask yourself the following things.

  • Am I financially fit?
  • What is my financial goal long-term or short-term?
  • What is my net investment amount?
  • Based on my financial health, how much risk can I afford?
  • Do I have apt knowledge about where and how to invest?
  • Do I need professional assistance?

Pretty sure, answering these questions will make a lot of things clear for you, like whether you need to opt for Robo-advisors and rely on the expertise of financial advisors or you can manage your investments by yourself.
Also, it opens up a lot of investment options for you based on your risk tolerance, net investment amount, and timeframe.
There is no doubt that investments can be quite intimidating based on the potential risk for loss, but always look at the brighter side, there is an even greater chance for potential gain.

Investment Options

Here are some top trending ways you can make your investments if you are a beginner in the field:

1. Invest in Stocks

Just for the sake of reminding you, stocks are your share in the company that offered stocks.
By owning stocks in a company, the owner is entitled to a proportion of the organization’s assets and profits.
You can buy stocks with the help of a stockbroker or create an online brokerage account to get started with the process yourself.
Remember to educate yourself well with stock performance histories, professional forecasts, news, etc., to make informed and wise decisions.

2. Exchange-Traded Funds

For diversified investment exposure, you should consider EFTs.
It is a type of fund that holds a basket of securities (Like stocks, assets, commodities, bonds, etc.) that can be bought and sold in a public market, just like stocks.
An ETF can be multiple stocks varying across different industries or could be particular to one industry.

3. Mutual Funds/ Unit Trust

Mutual Funds and Unit trusts are typically the same, where a pool of money is generated by several potential investors to invest in a range of securities.
It considerably reduces the risk of loss due to diversification.
The key here is to be cautious about where to buy your mutual funds from their fees and conditions.

4. Physical Commodities

Investing in physical commodities like property, crude oil, gold, silver, and other valuable metals is an old but still a highly practiced investment method.
You can invest directly in physical commodities or indirectly by purchasing shares in commodity companies, mutual funds, or exchange-traded funds (ETFs).

5. Others

This is not where the list ends.
In fact, the list is quite long, and you have to filter out the options best tailored to your needs.
You can also consider the following options:

  • Starting your own business
  • Creating a blog, podcast or online shopping page
  • Start a business or a project in partnership.
  • Peer to Peer lending
  • Consider a retirement plan like CPF

Main Difference between Savings and Investment





DurationSavings are a short-term goal. For example, you usually save for a short term goal in mind, like going on a vacation, buying a new car, saving for home improvement, or semester fee.Investment is a long-term goal and hence requires patience. You cannot say how much, but you usually have to go with the flow of the investment market and make your move when investment conditions are favourable. 
AimSavings aim to protect the money you already have to use them in an emergency event. The investment aims to grow your wealth. The money sitting in your accounts is not just waiting to be utilized but is invested to maximize returns on it.
LiquiditySaved cash is highly liquid. You can withdraw it whenever you want from your savings account. Hence, it is always available and accessible to you. The money invested has very little liquidity. If you wish to have your money back whenever you want, I am afraid investment wouldn’t allow it. Your money has taken the form of assets now. It is in the form of stocks, funds, or property now. It is not always easy to withdraw your money from the investment. 
RiskSavers deposit money in a low-risk savings account, opting for the highest annual percentage yield. There is little to no risk of loss. You might not be gaining anything from that amount, but you are not losing either.  In contrast,  to obtain a higher return in exchange, investments are usually accompanied by a high risk. You can minimize to an extent by opting for diversity in investments and being fully informed of the investment market and trends.Still, there is no way you can fully eliminate it.

The Bottom Line

Savings and investment are both equally important to provide you with the financial security you are yearning for.
One alone cannot do it.
While Savings is usually for an emergency event, you should always think around investment ideas to help you grow your money and provide you with the comfort you seek in your future.
Always begin by analyzing your financial status, save whenever you can and invest as soon as you reach a minimum amount to do it.
Remember, you can start an investment with an amount as low as $500 too, let go of the false notions that investments require huge capital at your end.
It’s just a choice you have to make and stick by it with vigour and determination.
Always keep reminding yourself that the act of regularly saving and investing money will significantly change the way you live your life in the future.



Jun Sing Tan

I help young adults and working professionals achieve their financial goals with a full suite of risk management and wealth accumulation solutions. I firmly believe that financial education should be easy and achievable for all. I am committed to service and hope to be your one stop financial solution.


Jun Sing Tan

November 23, 2020