Visit our website: http://franklintempletonindia.com Difference Between Saving and Investing So you’re a pretty hardworking person. You earn reasonably well, are content with your comfortable lifestyle, and ehh… even manage to save about 20% of your income every month. SAVINGS! That’s great! Now fast-forward to your retirement. You open up your savings, but what have you got? Whaat, that’s not as much as you hoped for, and definitely not as much as that colleague of yours! But what went wrong, you wonder. He worked as much as you did, earned the same and saved the same! So why the massive difference in retirement funds? Well, the difference is that while you kept saving your money, your colleague was busy investing his! What is Savings? Take a person’s monthly income and deduct their Expenses. These expenses could be anything from food, a visit to the movies or mall, school fees for the kids, EMIs on a house or car… you get the point. What they’re left with, after all expenses, is the surplus. Well then… What is investing? Savings is money that is left after accounting for expenses… While investing is the process of growing this money. Confused? Here’s an example of how this works. Say you have 100 mango seeds. Those are your savings. Now you could just put these seeds in a box and be content, but that would be a little silly, wouldn’t it? On the other hand, you could go the smarter way and actually plant your seeds. If you plan carefully, and are patient with the entire process , you will end up with a grove of mango trees that actually yield fruits! So instead of leaving the seeds idle, you actually put them to use and nurtured the trees until they became full-grown. This entire process can be thought of as investing. Think of it like this. Savings are the raw material and Investing is the process one must go through to get the yield. So a person has to begin with savings and then invest those savings in appropriate investment options to reach the next level. But what is this next level? And why is it important to take savings there? Well, say you want your precious daughter to become a doctor in 10 years time. And assume that in today’s terms, the estimated cost of that education is Rs. 50 lakhs. So you calculate that by saving Rs. 5.0 lakhs every year, you will be ready with the Rs. 50.0 lakhs kitty in 10 years time. Perfect! Right? But is that really gonna be sufficient 10 years later? No!!! So what’s playing the spoil sport?? INFLATION!! At an assumed inflation rate of 6%, in ten years time, the cost of that education would be over Rs. 89 lakhs. Now suddenly you either need to save approximately Rs. 9 lakhs every year or invest your limited savings wisely and regularly every year appropriately so they can grow to the amount you need in 10 years. It’s true! Investing can help channel your savings towards a definite direction and purpose, so that years later you could achieve your goal of creating a corpus for her medical education A very important factor to remember, for converting savings into investment, is Discipline. A matter of mere dedication – saving & investing regularly and religiously over a long period of time. Try to be extremely judicious when spending money and invest your savings keeping a goal in sight, and a definite deadline to achieve that goal. Savings and Investment are two sides of the same coin. While savings help plan for future goals, it is investing wisely that could help achieving those goals. Because all the discipline while saving is of no use if one’s precious savings aren’t invested wisely. Let’s go over this one last time: You’ve got to control expenses so that you can generate savings. Save regularly, over long periods of time and make sure you invest those savings wisely and appropriately. Now let’s fast-forward to your retirement once again… ahh you could be living quite the life at 65. It’s all very simple – just keep investing your savings! We hope you enjoyed watching this video! Watch more, and we’ll help you learn about different investing concepts. You can also write to us with your feedback (editor@templeton.com)
Visibility: 10867
Duration: 4m 45s
Rating: 63