What's the Difference Between Saving and Investing?
Understanding How Saving and Investing Work
When it comes to building your wealth, you’ll often hear about 'Saving vs Investing'. They both help you grow your money, but they work in very different ways. Knowing the difference between saving and investing can help you make better decisions to reach your financial goals. Should you put your money into savings or investing? Read the rest of this blog to help you decide what’s best for you.
What is Saving?
Saving is when you put money aside for the future. It’s usually kept in a safe place where you can easily access it, like a bank account. Saving is all about keeping your money safe and ready for when you need it.
People save for all sorts of reasons, such as:
Building an emergency fund.
Saving for a holiday.
Putting money aside for a big purchase, like a car.
Savings accounts are typically low-risk, which means your money is safe, but it won’t grow very quickly. You might earn some interest, but it’s usually a small amount.
What is Investing?
Investing is different from saving because it involves putting your money into assets like stocks, bonds, property, or funds. The goal of investing is to grow your money over time. Unlike saving, investing comes with risk – you can earn higher returns, but there’s also a chance you could lose money.
People invest for reasons like:
Growing their wealth over the long term.
Building a retirement fund.
Creating a source of passive income.
Investing is better suited for long-term goals because markets can go up and down. Staying invested for years can help you ride out these changes and achieve growth.
The Key Differences Between Saving and Investing
Risk Level
Saving: Low risk. Your money is protected and usually kept in a bank account.
Investing: Higher risk. You can make more money, but there’s also a chance of losing some or all of it.
Returns
Saving: Small returns through interest. Your money grows slowly but steadily.
Investing: Potentially higher returns over the long term, but not guaranteed.
Access to Your Money
Saving: You can usually access your money quickly, especially if it’s in a regular savings account.
Investing: It can take longer to access your money, especially if you’re investing in property or funds.
Goals
Saving: Good for short-term goals or emergency funds where you need easy access.
Investing: Better for long-term goals like retirement or building wealth.
When to Save and When to Invest
It’s important to decide what’s right for you based on your financial goals, how much risk you’re willing to take, and when you’ll need the money. Understanding when to save and when to invest can help you strike a balance between financial security and wealth growth.
Save if you need your money soon, want to keep it safe, or have short-term goals like building an emergency fund, saving for a holiday, or a major purchase. Saving is also ideal for creating a financial cushion for unexpected expenses.
Invest if you have longer-term goals like growing your wealth, building a retirement fund, or generating passive income. Investing can offer higher returns over time but requires patience and a willingness to accept risk.
Choosing to save or invest doesn’t have to be an ‘either-or’ decision. Many people find that combining both strategies helps them achieve financial stability and growth. It’s all about understanding your goals, your timeline, and your comfort with risk.
Using Both Saving and Investing
For most people, a combination of saving and investing works best. You might keep some money in a savings account for emergencies while investing other money for the future.
Final Thoughts
Understanding the difference between saving and investing can help you make better financial choices. Saving is about protecting your money and keeping it accessible, while investing aims to grow your wealth over the long term. It’s important to decide what’s right for your goals and how comfortable you are with taking risks.
The value of units can fall as well as rise, and you may not get back all of your original investment.
Approved by In Partnership FRN: 192638 10/04/2025