Saving is not equal to investing

We save to tide over difficult times. We invest to pursue financial goals like a comfortable retirement.
Gautam Chikermane
AT 22.3 per cent, India’s savings rate is respectable. And yet India, and Indians, are not wealthy. This high-savings-poor-savers contradiction occurs because we believe in saving for a rainy day rather than in creating wealth. We look at putting money aside for emergencies or even for a comfortable retirement, not to make our money grow and create wealth. We seek the security of keeping our capital intact rather than taking a well-planned risk with it. We focus on saving rather than on investing. One of the problems is our belief in this equation: saving = investing. I have seen even experts confuse these two words and use them interchangeably. While on the face of it they may be the same–in that both sacrifice present consumption for future use–in spirit, they’re not.
Different goals. People save in anticipation of uncertainties–a sudden hospitalisation, being out of a job for six months and so on. It’s all very well when there’s a cheque coming at the end of the month or when business is growing. But when things aren’t so good, this money helps them get by without too much misery. On the other hand, people invest to pursue life goals such as building a house, financing a child’s marriage or a comfortable retirement.
Opinion in Outlook Money

Invest well to spend smartly

The here and now is all very well, but you need to save and invest to take care of your future needs.
Gautam Chikermane
TRUE, THE starving stomachs of the 40-year-long Socialist era had to be filled. So, now that the economy has been liberalised, cars, TVs, VCRs, CD players, chocolates, jeans, shoes, drinks–just about everything the wealthier classes had aspired to earlier–are being bought as if they will disappear tomorrow. Much of this buying is financed by debt; so not only are they spending much of what they have, they are borrowing to do so! But the race for the latest goodies is never-ending: it could be a Furby for your daughter today or a holiday on the moon tomorrow. The question you need to answer is this: what are my financial priorities? Let me explain. I’m listing three absolutely essential, absolutely ‘boring’ things all of you will definitely have to spend on. Make sure you’ve planned for them before you buy the next fashion statement.
Opinion in Outlook Money