Saving vs Investing vs Spending: Find the Right Balance in 2021

Jan 13, 2021
 |  1 min read
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The nightmare that was 2020 has passed and it is time to actively reflect on our financial goals for the new year. Yes, the past year has passed on ordering take out, online shopping and binge watching on entertainment streaming services.

Needless to say, spending has taken precedence in 2020. But now is the time to find the right balance between saving, investing and spending. If we were to describe the difference between saving, investing and spending in a nutshell, we'd say each is a way to not only spend our income but also grow our income.

Wondering how? Our spends are generally for things we want – to want those things, we need to save up and to save up, we must invest that income. With us, so far? Let's make this simpler and understand each concept, one at a time.


Let's start with savings. There are different ways to save your money – the simplest way is to let it sit in your bank account and let it build over time. But with today's savings account interest rates offered by banks, your savings will build up at a tediously slow pace. Additionally, your savings are not going to be able to keep up with the rapidly increasing prices. Most banks offer several ways to save money like fixed deposits, term deposits and recurring deposits. These tools can actually help you make disciplined savings – especially if you instruct your bank to auto deduct the amount each month.

You can also save money by tracking your expenses, planning your goals, cutting costs by cutting down on impulse purchases and managing your budgets better. But managing your expenses and setting up a savings account will only get you so far. A great way to save and build your money is through investments. But before we cover investments, let's understand spendings.


Spending money can be interpreted in many ways – spending money can help you buy what you want but it can also help you save your money. For instance, spending money on motor insurance can help you save money in case of an accident. The same stands true for health insurance. Spending money on the new PlayStation 5 is just that – spending money. But let's say you're spending money to buy supplies for your business. That's spending money to make money. It's a well planned expense which will eventually help you grow your income. Speaking of growing your income, let's understand how spending is different from investments.


Spending money is not necessarily done with the goal of receiving a return. But investments always have the goal of either saving your money or growing your money. In today's financial market, potential investors have access to several investment instruments like mutual funds, stocks and shares, bonds and securities etc. These investments can help you save money by reducing your income tax burden and can help you grow money by giving you returns after a certain period.

Now that you have a fair idea of what are savings, spendings and investments, let's look at understanding how you can go about getting started on each of them.

Save, Invest then Spend

Every person has a different appetite for savings, spendings and investments. This is usually dependent on how much money they make, their age and their financial goals. Let's say you're a student. Most of your income comes from a parent or a guardian and in the odd case, a part time job. But that income is usually used for expenses like food and entertainment. As you grow older, you transition into being a professional and start making your own money. At this stage you're usually advised by your parents or anyone in a senior position to start saving actively. This means you open up a savings account and might even experiment with deposit schemes. This stage also puts you in the bracket of having a taxable income. So for the first time, you will start to spend on tax saving instruments like life insurance, public provident funds etc. As your income grows, you automatically start considering where you can invest your money. At this stage, you need investment options that will help your wealth grow. This means investing in mutual funds, stocks and bonds and other market securities that will help you accumulate enough wealth to meet your financial goals.

These financial goals could include larger purchases like a home or a car or even a holiday abroad. The wealth accumulated from your investments can also be used to fund further education, your wedding or your own business. All in all, savings, spendings and investments are inversely related to each other. They are a part of your financial life cycle and the state of each determines your financial health.

Don't let expenses cut a hole in your pocket

Whether you are a student or a professional, your financial cycle of savings, spendings and investments has to start somewhere – each element leads to the other. A great way to start saving is to budget your expenses. Sometimes, unforeseen expenses can mean our savings can take a hit. Wouldn't it be better to avail of a quick, instant personal loan than dig into your savings? It is easier to repay off a personal loan at a reasonable rate of interest over a period of time than to deplete your accumulated wealth in one go.

Instant personal loan apps like mPokket can help you get started on the right financial path by approving and disbursing a quick cash loan online small amounts, so that your savings are not burdened. With mPokket, you can apply for an instant personal loan through the app on your phone, use minimal documentation for your application and once approved, you can avail of a short term loan ranging between ₹500 and ₹45,000 within a mere 48 hours. It's safe, convenient and quick – exactly what you need to step onto the road to financial freedom.

Gaurav Jalan

Gaurav Jalan is the Founder and CEO of mPokket, a digital lending platform serving underserved Indian youth. He leverages technology and experience to deliver cost-effective credit to marginalized populations. In his role, he provides strategic direction and oversees execution to fulfill mPokket's mission.