The Difference Between Software Updates and Upgrades

Woman on computer in coffee shop
Omar Havana / Stringer/Getty Images

If you use software for your finances, you have probably encountered suggestions to update, patch or upgrade that software. You may have also been offered updated drivers for your hardware, such as printers, too. Updates and upgrades may sound like the same thing, but there are important differences you should understand.

Software Update

A software update (also sometimes called a software patch) is a free download for an application or software suite that provides fixes for features that aren't working as intended or adds minor software enhancements and compatibility.

An update can also include driver updates that improve the operation of hardware or peripherals or add support for new models of peripherals.

Software Upgrade

A software upgrade is a new version of your software that offers a significant change or improvement over your current version. A software upgrade requires the purchase of the new version of your software, usually at a lower price than you would pay if you were to buy the software for the first time.

If you bought your software recently, and an upgrade is released soon after that, most personal finance software companies will offer the upgrade to the latest version for free. Be sure to register the software when you install it so you know if you qualify for deals like this.

Understanding Software Version Numbers

All software applications have version numbers associated with them. This number helps track iterations of the software, including updates and upgrades.

It is actually represented as a series of numbers separated by periods.

The leftmost number in a software's version number represents major upgrades (in some cases a free update may increase this version number) to the software. For example, going from version 1.0 to 2.0 is a major update. These upgrades may also have "version names" associated with them (e.g., for operating systems, "Windows 10" or "OS X Mavericks" are version names).

Major OS upgrades of this type may require a purchase.

The rightmost number in a software's version number generally represents minor updates. Going from version 3.0.2 to 3.0.3 is usually a small change and often delivered as a free update.

Other numbers between these two can represent varying levels of updates or upgrades to the software.

Operating System Updates and Upgrades

Separate from your financial software, your computer's operating system will also offer updates and upgrades. These, however, affect your entire system and can have an impact on how your financial software functions.

Operating System Security Updates

A common operating system update is a security update, which is issued to protect your computer against vulnerabilities that might be exploited by hackers and viruses. It is wise to install security updates when they are released to ensure your system is as protected as possible against constantly changing threats. 

Other Operating System Updates

Beyond security updates, operating system software may be updated to correct nonsecurity related bugs or other issues that may have turned up since it was installed. These updates may also make enhancements or add new features to how the OS functions.

These updates are usually optional or recommended and have minimal impact on your system or your software. Depending on your OS settings, updates may be installed automatically on your system. You can change automatic update settings in Windows.

Operating System Upgrades

OS upgrades, however, are larger and can make more significant changes to your operating system. These upgrades can make significant changes to your system in both functionality, user interface and general appearance over the previous version.

Examples of operating system upgrades include upgrading from Windows 7 to Windows 8 or Windows 10, or on Macs upgrading from OS X "Snow Leopard" to "Mountain Lion."

Operating system upgrades can affect how your financial software functions. Before making any major upgrade to your operating system software, check with the manufacturer of your financial software to ensure it is compatible with the new version of the operating system.

In some situations, your software may be incompatible with an OS upgrade, and it may even cease functioning.

Software manufacturers usually offer free updates for their products to make them compatible with new versions of operating systems; however, these updates may not be immediately available when the new OS software is released. So, again, always check with your financial software manufacturer for compatibility before you upgrade your operating system software.