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Saving vs investing

What is saving?

Saving is putting aside some of your money for the future. It's a type of investing that is considered fairly low risk. You might be saving for something specific, like a new car or a holiday. Or building a savings pot to cover any emergencies or unexpected costs you might face.

You can build your savings in one-off or regular payments. And if you choose to save using an easy-access savings account, you can get back what you put in, plus the interest you've earned, whenever you want it.

Although saving is regarded as low risk, the returns you'll get on your savings from interest can be modest, especially when interest rates are low. You also need to remember that the rate of inflation may rise and reduce the real value of your savings and the interest you earn.

Putting money into savings may be suitable for people who:

  • need or want easy access to their money
  • are risk averse, and prefer the relative safety and predictability that savings provide
  • are putting money aside from a young age

What is investing?

Investing also involves setting aside money for the future. However, with investing, you're putting your money into something where you believe the value will change over time. It can involve buying assets such as stocks, bonds, mutual funds or property, with the expectation that your investment will make money for you over a given period.

You invest money usually because you hope to make greater returns than you could by keeping your money in savings. There is a risk, however, because your returns are not guaranteed and you might get less back than the sum you invested in the first place.

Investing money may be more suited to people who:

  • are comfortable taking the risk that the value of their investments could go down as well as up
  • have money to spare and are able to set money aside for the medium or long term
  • want to take a risk that they could make potentially better returns on their money than they could achieve by putting it into savings accounts

Deciding whether to save or invest your money is a matter of personal choice, and should be based on your financial goals, as well as your personal attitude towards risk.

Sustainable investing

If you're considering investing, you might be interested in sustainable options. Investing needn't be exclusively about identifying opportunities that deliver the greatest financial profits. Increasingly people want to know where their money is going and what it's being used for. They believe it's important to know that their investments are aligned with their own values, which is why they look to make sustainable investments.

Sustainable investing covers a wide spectrum. It might include:


How companies are making an impact on the environment:

  • Climate change impact
  • Air & water pollution
  • Waste Management
  • Energy efficiency
  • Water scarcity

How companies engage with and impact on their employees, clients and communities:

  • Human rights
  • Consumer privacy
  • Gender equality
  • Data security
  • Health & safety

How companies are governed or managed:

  • Board structure
  • Company ownership
  • Financial reporting
  • Business ethics & culture
  • Executive remuneration

Save or invest?

So should you save or invest? It's easy to end up going around in circles when trying to decide on the best way to grow your money. Whether to save or invest will depend on your individual circumstances and the financial goals that you have set yourself.

For short term financial goals, savings held in one or more savings accounts may be the sensible choice. You will have easy access to your savings when you need them, and there is little risk that you will lose your money. However, you should bear in mind that while interest rates may be low, returns on your savings may be modest. You also need to remember that any interest you earn may not keep up with inflation, or increases in the cost of living.

For long term financial goals, investing may provide a better chance of achieving higher returns than keeping your money in savings accounts. If you don't need to access your money in a hurry, and can afford to tie it up over a number of years, investing can offer a better chance of keeping up with or beating inflation.

For many people the answer is a blend of the two. For example, to build an emergency fund to meet unexpected costs, an easily-accessible savings account would seem a sensible option. However, to achieve long term financial goals, like saving for retirement, taking a degree of investment risk could earn you a greater return.

Whether to save or invest will depend on your individual circumstances and the financial goals that you have set for yourself.

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