The distinctions between Saving, Investment and Speculation ... in life

Something I have struggled with - but have come to understand over time - is how to make distinctions between these three things:

• investing
• saving
• speculating

Not only in a fiscal sense - but in other areas of my life as well.

These are all very different things … although there is some overlap; perhaps enough overlap that it becomes very easy to conflate all three into one one ‘murky’ concept. For the larger part of my life I saw no meaningful difference between these things; nowadays, I see a little more clearly; and am hoping to share it with any of you who are ready …

Investing is about putting something up (time/money) in order to produce a return in the future. We invest time in learning a new technique, a new language, etc - in the knowledge that we will be able to ‘use’ it in the future. 

Investing is ultimately about ‘producing something’ that was not there before.

Saving is about putting something to one side for future use. When we do this in a fiscal sense, we hope to do so in a way where we at least keep abreast with inflation. Saving is about ‘setting aside’; about delaying gratification; about consolidation, in some sense. 

Saving is ultimately about ‘preserving’. 

Speculating is about taking risks; ideally risks that we can manage. This is more about seeking an ‘above average’ return … but doing so in an environment/area where there is also a real possibility of suffering an ‘above average’ loss. The rule of thumb is simple here; only speculate with what you can afford to lose - whether it be time/money/whatever. 

Speculating is ultimately about ‘educated gambling’.