Between saving and investing, you might still be in a dilemma. Both are often mentioned a lot regarding finance, but it feels like many people still don't understand the difference. Saving feels safer, while investing is said to make your money ‘multiply.’ But, which one is actually more profitable? Let's break it down so you don't choose wrongly!

Definition of saving and investing

Before discussing the difference between saving and investing, it's good to know the definition of both. Read until the end!

Definition of saving

Saving is the most basic way to put aside our money for future needs. Usually, we put it in a safe and easily accessible place, like a bank or even a piggy bank if you want a classic one.

What makes saving more appealing is that the money won't decrease, unless we use it ourselves. However, don't expect much ‘growth’ of money here, because the savings interest is usually very small, sometimes not enough to offset inflation. So, saving is more suitable for short-term goals or emergency funds, for example, paying school fees, buying a dream item, or simply as a reserve for sudden needs.

Definition of investing

Unlike saving, investing is a way to make our money ‘work’ and grow over time. So, it doesn't just sit idle like in savings, but the money is circulated in various financial instruments, such as stocks, mutual funds, gold, or even property.

The goal? So that its value increases and can help us achieve long-term financial goals. But, investing has its risk, you know. Its value can fluctuate depending on market conditions. That's why investing is suitable for those of you who are ready to take risks for the potential of greater profit.

Difference between saving and investing

Here are 4 main differences between saving and investing that you need to know!

1. Financial goals

The difference between saving and investing actually lies in the financial goals you want to achieve. If you're saving, it's usually more for short-term needs or emergency funds, like buying a new gadget, paying school fees, or saving for a vacation. The good thing about saving is that the money can be withdrawn anytime, so if there is an urgent need, it can be used immediately without hassle.

Meanwhile, for investing, the main goal is usually for the long term, like retirement funds, buying a house, or preparing for children's education costs. With investing, your money can grow faster because there is a potential for greater returns, although there is a risk that needs to be considered.

So, if you need money quickly and flexibly, saving is suitable, but for bigger and long-term goals, investing is more recommended. You can more easily achieve financial freedom at a young age.

2. Security and risk

Besides the goals, the difference between saving and investing also lies in the security and risk profile. One benefit of saving is that it tends to be safer because our money won't decrease, unless we take it ourselves. Meanwhile, investing has risk because its value can fluctuate depending on market conditions. But, this risk is comparable to the potential return.

3. Money growth

Money stored in savings usually grows very slowly because of the small bank interest and often loses to inflation. For example, if savings interest is only 1-2% per year, while inflation can be 3-5% per year, it means the money you store actually decreases in its purchasing value over time.

Conversely, investing actually makes your money grow faster, even though there is a risk of loss. Investment instruments such as stocks, mutual funds, or bonds can provide a much higher return than savings interest, even reaching 7-10% per year, depending on market conditions.

Even though there is a risk, the potential for growth is greater, and in the long term, the difference between money growth in savings and investing is very noticeable. So, even though saving provides security, investing offers a much more profitable growth opportunity.

4. Accessibility

Lastly, when talking about accessibility, saving is clearly easier to access anytime, especially if your money is stored in a bank account or in an easily reachable place. For example, when you need sudden funds, such as for medical expenses, vehicle repairs, or even need to buy an unexpected item, you can directly withdraw money at an ATM or through a mobile banking application.

The point is, saving doesn't require long thought because the money is always ready to be used, whenever you need it. This is why saving is very suitable for emergency needs or for short-term goals, which require you to have funds that can be accessed quickly and without hassle.

Conversely, investing is usually not that flexible. Even though investment instruments such as stocks or mutual funds can be liquidated in a relatively fast time, the process still takes time and sometimes involves several stages. For example, if you want to sell shares, you have to wait for the market to open, monitor the price, and then decide the right time to sell.

Saving or investing, which is more profitable?

Saving or investing? Hmm, both are equally important. Actually, you don't have to choose one because both can complement each other. Saving is perfect for short-term needs, for example, emergency funds, vacation, or buying a dream item. Meanwhile, investing is more suitable for long-term goals, such as buying a house, preparing children's education funds, or even retirement funds. But how do you keep your finances controlled while doing both at once? The Honest Credit Card can be a practical solution to help you save and invest more wisely.

For saving, the Honest Credit Card makes your life much calmer. The cash flow management feature in the Honest App automatically records all your expenses, so you always know where your money is going. If there is a sudden need, you no longer need to take from your savings because Honest is ready to be the savior. Plus, there are real-time notifications that will make you quick to monitor your finances. This way, your savings remain intact and can be used according to the initial plan, for example for a dream vacation or buying an item you've been eyeing for a long time.

Now, for investing, Honest Credit Card is also no less helpful. The Cashback from Honest transactions can be collected and utilized to add investment capital, for example buying mutual funds or adding to gold investment balance. This profit won't disturb your savings at all.

In addition, Honest gives a large limit of up to IDR 100 million, so if there is an attractive investment opportunity, you still have the flexibility without having to think twice. What's even cooler, Honest has a flexible installment feature—you arrange the payment method yourself, whether you want to pay in relaxed installments, pay partially, or pay off all at once.

So, no reason anymore to be confused about choosing between saving or investing. With the Honest Credit Card, everything becomes easier, safer, and more organized. Your finances remain stable, savings are safe, and investment is running.