Having a secure future is certainly everyone's dream. A secure future is generally indicated by stable and safe financial conditions without worrying about potential financial risks in the future.
Therefore, various efforts need to be made to anticipate financial risks. One thing you need to consider starting early is saving and investing.
By having savings and investments, you can prepare various funds for the future, ranging from emergency funds, pension funds, education funds, and others. However, did you know that savings and investments are two different things?
In this article, we will discuss the differences between savings and investments. Check out the differences between the two and see which one suits you better!
Key Takeaways:
- Savings are deposits that can only be withdrawn according to certain agreed terms.
- Investment is the placement of money in a company or project with the aim of gaining profits.
- The differences between savings and investments lie in several aspects, including financial goals, risk levels, amount of returns, protection against inflation, and fund withdrawal processes.
What is Savings?
You must already be familiar with savings. Savings itself is one of the most popular bank products among the public.
According to Law No. 10 of 1998 concerning Banking, savings is a deposit that can only be withdrawn according to certain agreed terms. Savings products cannot be withdrawn by check, giro, or other equivalent instruments.
The main purpose of saving is to set aside a portion of the customer's income and save that money as a reserve for future needs. Now, savings are also often used for business transactions, both individually and in groups.
Generally, savings are more commonly used for short-term goals and have minimal risk. Additionally, savings have very slow asset growth.
What is Investment?
Investment products generally lead more towards asset growth in the form of returns from invested funds. Broadly speaking, investment involves purchasing assets that are expected to be resold at a higher value.
According to the Indonesian Dictionary (KBBI), investment is the placement of money in a company or project with the aim of gaining profits.
There are many types of investments you can make, such as gold investment, stock investment, building investment, foreign currency investment, and so on.
While savings are used for short-term goals, investments are generally intended for the long term. However, because investments have a faster rate of growth or increase in asset value, investments also have greater risks and more profits.
5 Differences Between Savings and Investments
1. Financial Goals
Investing and saving have different financial goals. Saving is the right choice for those who have short-term goals. Meanwhile, investment can be an option to support the achievement of long-term financial goals.
Usually, people save to buy goods, go on vacation, or other temporary things.
Meanwhile, people who invest generally have goals to buy a house, prepare education funds, pension funds, and other things that have high value.
2. Risk Level
Certainly, every savings and investment has its own financial risks. However, there are significant differences between the two.
One financial risk that may occur when saving is the potential for loss of funds. The risk of loss can occur due to various factors, either due to lack of security in the financial system or because someone does not keep their money in a safe place.
Therefore, it is important for customers to create savings accounts at trusted banks with security systems that have been proven to anticipate the risk of loss.
Meanwhile, the risk that may arise in investment is the possibility of suffering losses due to significant fluctuations in asset prices. Before starting to invest or buy an asset, it is important for investors to first analyze their risk profile to prevent these risks.
For you to gain profits from investing, you need to analyze your risk profile because the investment risk level is proportional to the potential profits to be obtained.
The higher the level of profit that may be obtained, the greater the risk that must be borne.
3. Amount of Returns
The next difference between savings and investments is the amount of returns obtained from both. Since the purpose of saving and investing is to gain profits, you need to know which product you want to get returns from.
Customers will get benefits from savings interest offered by banks, which is relatively small, reaching only about 1 to 2 percent per month. To obtain higher savings interest, you need to save money in the form of time deposits.
If you want to get bigger returns, then you can invest. But it's important for you to choose the right investment instrument, because this return level will depend on the type of investment you choose.
For example, you can get bigger returns through stock investments. However, you must also be prepared to face large loss risks as well.
4. Protection Against Inflation
Did you know that inflation is one of the risks that may occur when saving or investing? Inflation is a condition where all prices experience continuous increases, which then results in currency values experiencing unexpected decreases or increases, known as fluctuations.
Savings and investments have different abilities in protecting assets when inflation occurs.
Unfortunately, savings cannot provide maximum protection for inflation conditions. But on the other hand, investments can provide better protection because the value of stored assets will move according to these fluctuations.
5. Fund Withdrawal Process
The next difference lies in the liquidity or fund withdrawal process. Savings and investments have different fund withdrawal processes.
You can withdraw savings funds more easily; you just need to take it through your personal account anytime and anywhere.
Meanwhile, to withdraw funds in investments, you must submit a fund withdrawal through the bank or investment application you use. This process will be longer if you decide to invest in property instruments.
Advantages and Disadvantages of Savings and Investments
Advantages and Disadvantages of Saving
There are certainly reasons why savings become a favorite product of the community. This is because savings have an easy process in making and withdrawing funds. In addition, currently there are many bank products that can store funds safely.
However, there are several disadvantages of savings products, including protection against inflation that is not yet optimal when compared to investments. Therefore, it is important for you to save money that will be used in the near future according to the financial plan you have made.
Advantages and Disadvantages of Investment
As mentioned earlier, investors may have greater potential returns from investments. Investments are also available in various platforms and forms of investment products, which you can choose according to your abilities and goals to be achieved.
Meanwhile, the disadvantage of investment lies in the relatively higher risk level and longer fund withdrawal than saving.
By knowing these advantages and disadvantages of savings and investments, you can decide which bank product is more suitable for you and adjust it to the goals you want to achieve.
Saving and Investing at a Trusted Indonesian Bank, BTN
Want to start saving for the future? Choosing the right bank for saving and investing is the most important step before you start.
BTN is certainly no stranger to Indonesian people. As one of the well-known banks in Indonesia, BTN is a bank that is guaranteed security and competence.
BTN itself has a commitment to become a bank that serves and supports housing sector financing through its three main products, namely personal banking, business, and sharia.
There are many savings and investment products that BTN provides for the community, including BTN Batara Savings, BTN Pension Savings, BTN Siap Savings, BTN Juara Savings, BTN Junior Savings, BTN Cermat Savings, and BTN Investa Savings.
In addition, you can receive many benefits by saving or investing at BTN. Some of them are easy account opening applications, competitive interest rates, secure deposits, and many more. Account opening and saving at BTN can be done through BTN Mobile online.
So what are you waiting for? Let's start investing and saving with BTN. Click this link to find out more.
