Investing vs Saving

“I am in my mid-thirties, and I usually put £1,000 into my savings account each month. I have recently been thinking about investing my money; however, I would like to keep some money in case of a rainy day. What are the benefits of investing my money over saving it?”

Carl responds:

As you may know, a savings account allows you to set money aside and earn interest in the process. There are benefits to both saving and investing. Savings are ideal for short-term or unexpected expenses, such as a holiday or paying for car repairs. You are unlikely to lose money unless you withdraw funds; however, savings accounts generally don’t have a very high interest rate.

Like saving, investing is also setting money aside for the future. While saving and investing may seem similar, investing gives your money the potential to grow at a faster rate than it could in a savings account. You are putting your money into something you believe will increase in value over time. As a result, investing comes with a higher risk than saving; but this may result in a much higher return.

When deciding whether to invest, you’ll need to consider any plans you may have in the next 5, 10, 15 years. You will also need to plan for any unexpected circumstances where you may need to access money quickly. By planning when you’ll want to access your money, you can manage the risk that you take. The value of your investment can fluctuate which is why investing is ideal for long-term saving.

There are benefits to both saving and investing. Before making any decisions, I would recommend speaking to an Independent Financial Adviser to look at all the different investment options that may be suitable. A financial plan tailored to your specific needs and goals will help establish what you need to save and invest.

Any opinions expressed do not constitute advice. The value of your investment can go down as well as up and you may get back less than the amount invested. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.