Skip to main content

Is it better to save or invest?

Build your Portfolio

When it comes to managing your money, should you be saving, investing, or both? While it can sometimes feel like a game of tug of war, saving and investing are far from opposing forces—both can play an important part in your wider financial plan.

A small set of golden scales.

In this blog, we’ll cover the difference between saving and investing, and how you might balance both.

How do I choose between saving and investing?  

First thing’s first: saving and investing are two different things. Saving is money that you put aside to spend later, and investing is money that you put at risk now in the hopes of getting more money later.

So why save?

One role that saving can play in your financial plan is as a protective measure. Let’s say you lose your job, or your car breaks down; having money saved up in an emergency fund (also called a ‘rainy day fund’) can act as a financial buffer for any unexpected events that occur. 

Outside times of crisis, savings can also come in handy for any shorter-term goals you have—like buying a car, going on holiday, or organising a wedding. For these kinds of goals, saving can be a better option than investing, because the money in a savings account can be easier and faster to access than money that’s been invested; in order to access money from an investment, you’d need to sell your investment first. Additionally, money held in savings accounts isn’t typically impacted by the ups and downs of the share market, meaning you have more certainty with saving than with investing in shares. 

And why invest?

The main differences between saving and investing are risk and potential returns. With saving, the risk is lower than with investing, but generally, the opportunity to make a return on your savings is lower too. When you invest, you do so in the hopes of making a return—and while that may come with higher risk of losing some or all of your money, it also has the potential to earn a higher return over the long term too.

Investing is also generally for long-term wealth development—time is the key ingredient here. So while saving can provide security in case of emergencies, and cash for shorter-term goals and needs, investing is about growing your wealth over time. 

How much should I save versus invest?

How you balance saving and investing is totally up to you. The two aren’t mutually exclusive either—you can do both! 

One place to start is to look at your financial situation; what does your budget look like? Do you have an emergency fund? Do you have any debt? And if you do, do you have a plan to tackle it? Getting the basics sorted will give you a better idea of how you might balance the two. You may want to consider:

  • Your goals—how much money do you need, what do you need it for, and what’s the timeline? Are you hoping to save $2,000 over the next 12 months for a holiday, or are you focusing on growing your wealth for when you retire?

  • Your time horizon—when are you likely to need the money? Will you need it within the next few months or years for a shorter-term goal, or will you grow your wealth slowly over 10+ years? 

  • Your risk appetite—how much risk are you comfortable with? Taking on a high level of risk gives you a chance of getting higher returns, but with larger odds of losing your investment—especially in the short term. If you’re investing over the long term, you may have more time to ride out the ups and downs of the share market.

Whether you choose to start by saving enough money for an emergency fund, saving and investing simultaneously, or prioritising investing for the long term, your approach will generally depend on what you’re trying to achieve.

Some people set a goal amount and work backwards from there, while others commit to putting aside a specific dollar amount or percentage of their income each time they get paid. It doesn’t have to be a huge amount either—with Sharesies, there’s no minimum investment, so you can start investing from as little as 1 cent, to whatever’s affordable for you. 

Plus, the amount you choose to save and invest isn’t set in stone forever—it’s important to review your plan and adjust things every now and again. You may want to ask yourself: are you on track to meeting your goals? Has your situation changed in any way (i.e. your income, goals, debt situation, time horizon, etc.)? Is your plan still affordable and sustainable? Do you need to shift the balance between saving and investing?

Wrap up

Like with most things in life, there’s no one-size-fits-all when it comes to saving and investing. Whether you choose to save, invest, or balance both (and how you balance the two!), depends entirely on your personal circumstances; so consider your goals, time horizon, risk appetite, and wider financial situation. It’s all about finding what works for you—which can involve making changes along the way!


Ok, now for the legal bit

Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.

Join over 600,000 investors