What is the difference between saving saving and investing?
When it comes to financial education, many UK citizens still have several questions. The truth is that maintaining financial control and not running into the red is still a big difficulty for most people.
However, to start having a financial health, we all know that it is necessary to maintain a balance between expenses and earnings. And, for that, a first step is to know the need to invest, to save and save.
But, after all, what is the meaning of these three terms and how to put them into practice? To help you find a financial control, we define each of these steps. Stay with us to understand each topic below:
- What is the difference between save money, save and invest?;
- What is the UK residents reality when it comes to saving, saving and investing?;
- It's better to save or invest: how important is it and how to get started?
What is the difference between saving, saving and investing?
In order to understand the difference between saving, saving and investing, it is necessary to know what each of these terms means. Come on?
What is saving?
The first item that we are going to explain to understand what the difference between saving, saving and investing is save money.
Saving consists of don't spend the money unnecessarily earned. In other words, avoid superfluous shopping temptations, paying attention to buying what is really essential.
In addition, a person saves their money in other situations such as when you stick to the grocery shopping list or when you opt for products on sale instead of buying expensive brands.
In summary, saving is paying a cheaper price on good quality items, making a good deal for your pocket.
What is saving?
Continuing the explanation of the difference between saving, saving and investing, saving is the act of save some of the money you earn. Many people confuse saving and saving.
However, when you save, you stop spending that amount instead of spending it more intelligently as is done when the person is saving.
Therefore, to save, you should set aside part of the money that was earned in the month and not use it for anything.
Read too: Saving wages: importance and tips on how to do it here!
What is investing?
Investing would be the next step after you've managed to save and save, as you will have an amount available to make your money pay off.
This step is just as important as the others, as you will not only be avoiding waste, but valuing your money even more.
In this way, when investing, you will be making the amount that was saved and saved multiply.
Discover the ‘Types of investments: 7 best options in the UK' in this other blog post.
What is the UK residents reality when it comes to saving, saving and investing?
Saving and investing are still not very common practices among UK citizens. According to a survey by UK residents Association of Financial and Capital Market Entities (Anbima), 56% UK citizens do not save money and do not have a financial reserve. About that, 75% do not carry out any type of investment.
The average number of physical investors in the UK is very small and has been decreasing since 2017. According to information from B3, the UK residents stock exchange, only 3% of the population invests in stocks, while countries like the United States and Japan this index reaches 55% and 45%, respectively.
That's why many UK citizens still struggle to maintain a financial balance. The truth is that in the country an immediate financial behavior prevails, that is, what is earned is spent.
The problem with this behavior is that many times, due to lack of planning, people end up spending more than they earn. This leads many UK citizens to become indebted. To get an idea, according to data from Serasa Experian, the UK has more than 63 million delinquent consumers.
To try to deal with the situation, UK citizens are looking for alternatives such as loans or overdraft to try to ease the debts. However, the ease of obtaining “these outputs” contrasts with another very serious problem: the interest!
As a result, many people end up transferring debts instead of paying them off. All because they end up resorting to practices that initially seem convenient, quick and easy to approve.
Want to better understand how overdraft works and what are the risks of using this option? We suggest reading this other article: Why are UK citizens tied to overdrafts?
It's better to save or invest: how important is it and how do you get started?
As you can see, the numbers in the UK are not encouraging. So now that we know the difference between saving, saving and investing, it's time to learn how to reverse this scenario.
Know how to deal with your own money and conquer the dream financial health it is essential for people to be able to guarantee a better quality of life.
Although many try to save without losing quality of life and even manage to save some money, they are still susceptible to unforeseen events that can totally upset this balance.
Situations such as illness, job loss, urgent home repair needs or car problems are examples that can happen to anyone at any time. That's why it's so important to follow the three steps: save, save and invest!
With that in mind, we've prepared some tips so you can get started now!
How to save
First of all, knowing the difference between saving, saving and investing, you must understand your own reality, because the best way to save is individual. However, you can follow some guidelines to get started:
- keep track of all the money that comes in and goes out monthly;
- use applications or spreadsheets to better manage these values;
- identify and cut unnecessary expenses;
- align with the rest of your family that everyone should save;
- pay bills on time to avoid interest;
- when possible, diversify your sources of income.
How to save
Only after you start saving will you have some money to save. Therefore, with the bills up to date and without the previous squeeze, it will be possible to start have a reservation.
However, it is important to remember that there is no point in using the money saved to cover unforeseen expenses. It is necessary to leave that amount “untouchable”.
One of the main ways to “not fall into temptation” and use the money saved is to put it into a savings account.
Read too: Emergency booking: 4 practical tips on how to do it [GUIA]
How to invest
Finally, you can make that saved money pay off, as just leaving it “kept” will make you hostage to the devaluation of the amount due to inflation. Therefore, the best alternative is if become an investor.
For those who are still new to this subject, you should start little by little, investing your money in assets through financial institutions, such as banks and brokerages, and receiving profitability on the loan.
An investment option for beginners is fixed income, such as Treasury Direct bonds, CDBs and CDI. To better understand how the main types of investment work, you can also check out this article: 7 best options in the UK!
We know that making money at the end of the month is pretty difficult, isn't it? Mainly due to the current economic situation in the country.
However, understanding the difference between saving, saving and investing is the first step in getting started! Only then will you be able to start your monthly planning to achieve financial balance.
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See you next time!