A retirement fund can be seen as a deposit account in which you add disability and retirement contributions.
Savings fund vs Retirement fund.
1. Savings fund
A savings fund/ account can be described as an account that is provided by a bank or other financial institution for individuals where you can save money and at the same time earn very good interest on the money that are held in the account.
There are different reasons why people decide to get a savings fund:
- You might be a new family that wants to start saving for your children’s education.
- Perhaps you have more specific goals in mind when you decide to save money, like a future holiday overseas or even to use the money as down payment on a new home.
- Some people also like to save money that they can use in case unforeseen emergencies might happen, like hospitals bills or a broken car.
Whatever the reason may be, it is never too early to start saving money.
Some of the advantages of a Savings fund include the fact that they are easy to obtain, since there is usually no credit check required.
It is also a very safe way to store your money and you will receive interest on the money saved.
2. Retirement fund
Now that we know what a savings fund is, let’s take a quick look at what a retirement fund is.
You might be asking yourself, isn’t a savings fund and retirement funding the same thing? Well some people might use their savings for the time when they retire, but there is a retirement fund that some people would rather use if possible.
So to have a retirement fund you basically have to be a member.
Usually when you are employed by a company that offers a retirement fund you can/ must become a member.
Of course there are also some advantages to having a retirement fund:
- You can improve your financial security for the future.
- It is easy to make contributions to the fund through payroll deductions.
- Your contributions can also reduce the current taxable income.
- Saver’s credit is available to you.
So like you can see from the definitions, there are differences between a savings fund and a retirement fund, but in the end both of them will help you financially.