The first type of person on the graph believes in saving more than investing. He has a short term goals and therefore is looking for short term profits. He allocates only a small amount to investments and focuses more on savings. Interest on saving accounts is often lower. Saving gives you access to ready cash when you need it as one can liquidate it in a short span of time. Saving has a lower return than investments. Saving allows for an easy access to the money and therefore the person may withdraw a part of his savings or the whole amount as per his wishes. This can prove to be unbeneficial as he can end up spending more money, since he has quick access to his savings. However, before deciding to invest or save, he needs to be clear if his approach is short term or long term. Is he looking for expenses and emergencies? Then savings is a good option. But it isn’t a smart plan for long term goals. It is like putting his money into a piggy bank, it won’t double but it will still be at a risk of being used immediately.
Investing over Saving
The second type of person focuses largely on investing. He understands and believes that investment will give him long term benefits and therefore allots more towards investment and lesser to savings. Investing wisely may give returns higher than savings in the long run. This technique also ensures a higher growth potential than regular saving methods. He has a better understanding of the likely growth and this helps him yield larger benefits over the period of time. The investor knows that investments involve risks but with proper research and right direction from experts it can be prevented. While planning for the future, he realizes the limited income resource and the changing needs, along with inflation; hence he invests first and saves after. Thus, making savings a part of his investment plan and not the other way. It is just like waiting for your treatment to completely heal you from a cold rather than stopping your medication midway
Do you save more or do you invest?