March 13, 2022, midnight

Nowadays, the lifestyle, especially in cities, imposes several financial liabilities on us and there are no room to evade them; including house rent, water, electricity and internet subscriptions, tuition fees, expenses of food and beverages, and other monthly outgoings without omitting the increased cost of living.

All above-mentioned elements make the matter of saving and earning some extra money, and setting and abiding by a monthly budget are difficult but not impossible, if we have good management and simple skills that help to arrange the income, expenditure and balancing between them to set a successful financial strategy for saving and investment.

When we mention the saving and investment, some people confuse with both concepts, so we shall highlight thereon in the context.

Saving or Investment?

The main difference between the saving and investment is “Money Period”, the saving in which the sum of money is accumulated in a safe deposit box to use it after certain years. While the investment means benefit from the saved money to build wealth during longer period.

People save for certain short-term financial objectives, for example, spending vacation, purchasing a new car or for emergency cases, they keep their savings in a low risk bank account it can be dealt on need, with low earnings and providing some money is available to invest it later.

Upon thinking to proceed with investing the moneys, the individual should not be owed to any person or entity and had to keep amount of money that you can do without temporarily such as amounts received as a result of extra work or retirement compensation and the like. It is worth mentioning that the investment takes years, maybe decades before getting its fruits and it is usually fraught with danger, but provides more probabilities to achieve the growth more than savings. The smart investment shall be made through calculating the results accurately and minimizing the risks via the amounts of money in various funds. The funds of low costs and risks are considered one of the common ways to achieve the same.

The most prominent differences between saving and investment

The saving is to save a sum of money for emergencies or to cover expected expenses in the near future, so it is a short-term employment of funds (from 3 months to 3 years), you can access to it quickly and easily at any time.

While the investment aims at increasing the wealth and targeting big future objectives, it means the long-term employment of funds (more than 3 years). The access to invested amounts of money requires complicated procedures sometimes and waiting for long period.

Savings accounts, fixed deposit accounts or accounts in the money markets and the like can be opened and obtain simple interest only without risks at all. The savings accounts is ideal way to keep a sum of money but it is not profitable if we relied thereon to keep huge amounts of money for too long period.

As for the investment, the financial experts advise creating a long-term and various investment portfolio in investment funds, shares, real estate or the like. The considered investments shall be safer if you do not dispose it for long period.

It is important to invest your amounts of money for 5 years or more, as the longest timeframe shall grant your investments extra time for recovery if the value thereof is decreased. Through planning for the time that you determine it to get your money, you can manage the risks that you may face. Here, you may ask yourself the following question: Why would I put myself at risk? The answer: the investment risks are not the same, whereas taking calculated magnitude of risks grants you a possibility to gain money more than you earn from savings.

Encouragement to Saving and Investment

KSA Ministry of Investment urges all citizens and nationals to save their money and provides support services to them for proceeding with their investments in a safe and reliable manner such as giving an advice on the legal entity and coordinating with the governmental authorities and giving an advice on the means of applications for licenses, services and required visas to start up, coordinating with specialized agencies in helping to work in Kingdom of Saudi Arabia , coordinating with specialized recruitment agencies, helping in advertisement, conferences, press releases, and coordinating with the financing authorities to consider the capability of participation and support.

Practical Advices

Financial Experts advise all people who wish to investment to bear responsibility for how they expend their income so that they can enjoy a decent and comfortable lifestyle and ensure safe future for themselves and for their families. The financial experts give practical advice starting from necessity of achieving savings objectives until getting advice of chartered financial expert to the importance of financial culture development through follow-up and reading in this field before thinking about investment.

Financial Experts also warn all people who wish to make investment to fall victim to illusion sellers and frauds. The Experts advise them not to rely on one solution to invest their money and thinking wisely and practical way instead of depending on intuition and estimation only.

In this context, anyone wants to proceeding with saving or investing can take the pieces of practical and psychological advice contribute to ensure integrity of saving and investment. The most prominent advice: a person must be grateful and happy with his ownership and not limit the matter to his material belongings only, determine a monthly budget for his expenditures, abide by it and to be patient, save money to provide price the items that he needs actually and do his best to avoid all types of loans and to create a balanced investment portfolio.

Before Saving

Before proceeding with saving of any amount of money, it is necessary to create a contingency fund you can use it in case of a problem occurs which necessitates a sum of money, through accessible savings account.

The saving shall be logic, if you invest money for 5 years at least. As for the money that you need on short-term, it may not be available to invest it sufficient time to compensate any reduction in its value.

As to the saved money in the medium-term; i.e. from 5 to 10 years, the saving may be logic to cover the academic tuition fees or furnishing a house, etc. Noting that if you are ready to incur some risks, the investment may make you earn proceeds on your money.

While the money that you shall not need it for more 10 years such as purchasing a house resides in it after retirement period. If you took a certain investment risks, you may gain more returns as the value of your money shall be diminished in the saving over time as a consequence of the inflation.

The Investment and Wealth

If you invest your money for the first time, the funds may be the ideal choice, noting that there are many types of investments; starting from very low risks investments to very high risks investments. No doubt, you shall find between them the proper type for you.

Some funds such as the multiple assets funds are invested in a wide set of assets such as bonds, shares and properties, this allow you to invest in various types of sectors, as the saying goes, you can put the eggs in many baskets not in one basket to distribute and reduce the risks.

Investing in funds may be lower risk than purchasing individual shares in one company, if you lost one investment in the fund, you can balance it with the other investments in the fund. Distribution of the risks in this manner is defined as “Diversity” is one of the golden rules of investment.

In return, the best thing in the funds to be collected by fund manager who shall be experienced investment expert and has a wide experience in this field. You are not required to be expert to invest in the funds, but you can be the investor who involves an expert to manage the investments on his behalf.

If you invest in shares, it is necessary to monitor the markets; if performance of a company is bad that you invested therein, it is extremely likely to lose your money. Price of your share shall be affected by other factors, such as supply and demand, interest rates and wider economy; therefore, you must aware of all types of these factors.   

It is worth remembering that, the money does not constitute a solution to all problems, but it certainly provides you and your family a decent and comfort life and helps you to achieve your goals; once you define it and set a timeframe to achieve it, your goals shall become real and be converted from dream into fact.

Finally, we can mention “two golden rules” in this context, the first rule states “the more you invest your money, the less effort you shall exert to gain money. The second rule summarize the above-mentioned statement “Save for the near objectives, invest for the future”.