Learn About Investing

Learn About Investing

How is investing different from saving?

Saving is about getting a cash nest egg together – for emergencies or shorter term goals. Investing aims to beat inflation over the long term. But it comes with risks alongside the prospect of greater reward.

When you save cash it’s (generally) secure and you get back what you’ve saved, plus a bit on top in interest. You can also usually access your money quickly, unless you committed to a longer-term account with a higher interest rate. The risks are low, but then so is the amount of interest you are likely to earn.

With investing on the other hand the risks can be much higher in the short term, and you may get back less than you invested in the first place. That said, with greater risk comes the potential of greater reward and the idea is that over the long term the value of your investment will grow faster compared to saving.

Inflation also influences your savings by decreasing the purchasing power of your money over time, but may have less of an effect on investments. Compounding has a positive effect on both savings and investments. The effect may be more limited for savings, due to the relatively low rates of interest though.

Investing and saving are not mutually exclusive, and as a general rule you should make sure you have a foundation of saving (at least three months of your salary) before you consider investing.