Explore the differences between saving and investing to decide which option best suits your financial goals.
The key difference between saving and investing is the level of uncertainty about the money you'll get back.
When saving, you'll always get back what you put in
Saving is a way of putting your money to one side until you need it and is for short to medium-term goals.
When investing, you’re aiming for your money's future potential
While there’s a risk when you invest, that you might get back less than you put in, there’s more potential to make a profit on your money over time.
Why save?
- Savings is suitable for short-to-medium term goals such as for a holiday or house deposit.
- We have different types of savings accounts. Some let you get to your money whenever you want to, others have restrictions.
- You can earn interest on your savings. This is paid gross for non-ISA products and tax-free for ISA products.
- While your savings won’t go down, inflation (the rising cost of everyday items), can reduce your money's value if kept in savings for too long.
- For hints and tips to help you save and choose the best account for you, visit our support page.
Why invest?
- Investing increases the chance of growing your money over the long-term (typically 5 years or more) and you could earn more than you would getting interest.
- Investing in a stocks and shares ISA, gives you tax-efficient returns on your investment, meaning there’s no income tax or capital gains tax for you to pay.
- It can potentially reduce the long-term impact of inflation which can affect instant access savings accounts.
- While you can get your money back, the goal of investing is to leave it untouched for as long as possible. Investing might not be the best option if you need regular access to your money.
How inflation affects the value of money
- When inflation goes up, the value of money goes down. £10,000 in 2009 could buy more than it can today because prices have gone up. Its real value in 2024 would be £5,510.
- Remember, what you earn from saving or investing your money will need to be enough to make up for inflation so that the value of your money doesn't end up being worth less in the future.
Should I save, invest, or do both?
- Before deciding, assess your whole financial situation such as paying off existing debts and considering the interest rates on your borrowing.
- A savings account is great for short-term goals and for life’s unexpected emergencies. However, if you are looking to grow your money over a longer period, investing could be worth considering.
- Ask yourself: How much money can I afford to put away? How long will it take to reach my financial goal? With saving, the initial deposit is a minimum of £1, while with investing you can invest as little as £20 a month or a £100 lump sum.
- To help decide whether to save, invest or both, try our savings and investments calculator to see how much you could save and how long it could take.
As with all investments your capital is at risk and you may get back less than you invest. Investments should be held for the medium to long-term (5+ years), unless there’s a fixed term that applies.
The tax treatment of your investment depends on your individual circumstances and may be subject to change in the future.
