STEEM NIGERIA CONTEST: SAVINGS AND INVESTMENTS
Hello Country people.
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INTRODUCTION
Savings and investments are two terms which people sometimes use interchangeably without much idea of what they really are. The two concepts are of necessity to mankind which is why it is necessary to know what they are and make a right choice on them.
INVESTMENT
Investment is an act of setting aside current funds with an expectation of future streams of benefits. It is a process of parting with money today or any other resources, with the expectation of future streams of benefits either in monetary or real returns.
There are two types of investments namely; real investment and financial investments. Real investments are investments in real assets such as land, building, equipments, or machineries. Financial investment on the other hand refers to investments in marketable securities such as bonds, stocks, treasury bills, etc. Also, there exists other types of investments such as investment in digital assets like cryptocurrencies, as well as investments in knowledge such as education. All these involve current outlay of resources for future streams of benefits.
SAVINGS
Savings may be defined as setting aside a portion of your income either on a daily, weekly or monthly basis in order to meet up with future needs or unforeseen occurences that may require funds. These funds can either be kept in the bank, in a safe or anywhere as the individual may deem fit.
Differences Between Investments And Savings
1. Risk: Investments has a high degree of risk while savings has minimal or no risk.
2. Future Expectations: Investment deals with parting with funds today with an expectation of future streams of benefits; while savings involves setting aside a portion of income to meet future needs.
3. Volume of cash outlay: Investments require a huge or bigger cash outlay while savings can be done by setting aside a very minimal portion of income.
4. Volume Of Returns: The returns associated with Investments are way higher than that of savings. Savings attract only minimal interest income while return on investment is much higher.
5. Liquidity: Savings are more liquid. Although some investments have high convertibility, some have lower convertibility.
My Opinion On Savings and Investments and the one I'd go for
Talking about savings and Investments, the first thing that comes to mind should be inflation. That is, the constant increase in prices that reduces purchasing power. Inflation has made it that money received today has more value over money that will be received in the future.
When I was a kid, I remember that one naira had great value. But due to inflation and currency devaluation, such coin doesn't even exist anymore. Those who saved that amount will get just that same amount or maybe a little higher.
But had it been that someone invested that amount in a worthwhile investment project, the returns as at now would have been massive, possibly in millions.This is where Investments come in. The return on investments considers inflation risk. Instead of keeping money in the bank and receiving a very low interest payment, it is advised that we venture into some investment programs that will yield future streams of benefits.
Personally, I embrace every investment programs I see as far as I have the capacity to take on such investments. However, some form of analysis should be carried out in order to determine the feasibility of such an investment to reduce the risk of accompanied losses.
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