Sounds like you're very confused about RAM and Storage differences.
This article should help you out, this is a reference to PC's but applies to Android devices also. http://www.wisegeek.org/what-is-the-difference-between-ram-and-memory.htm
In layman's terms RAM is a kind of temporary storage that apps are running their data from as it's fast, however Storage is the permanent storage of your apps.
Why does your memory/RAM run low? Likely because you have multiple apps open in the background, consuming RAM, which causes the foreground app to run out. Or it could even be that the app needs more RAM than your device can provide, it is a little dated after all, if you were wanting to play all the latest games on it.
Why does your storage run low? Simply because there's too much stuff installed, or their could be a specific culprit with a large amount of cache/app data. Check this through the Applications manager in your settings.