The Difference Between Saving and Investing

Once you've decided to gain control of your finances and start planning for the future, it can be difficult to know where to start.

Of course, saving is probably number one on your list, but creating a solid nest egg doesn’t end there. Once you have about three to six months of regular expenses saved up, consider investing your money—because who doesn't want their money to work for them?

So, what is the difference between saving and investing? We're glad you asked.

First comes saving
Saving your money means putting funds aside and safely storing them for an emergency or some other purpose. This will more than likely be in a low-risk account with a low interest rate, meaning your money doesn’t grow very quickly. However, that's not to say that a savings account isn't a crucial part of financial planning.

There are several different types of savings accounts available. Traditional savings accounts are great for, among other things, those new to financial planning. Certificates are best suited for people who can afford to set money aside for a few months while it compounds a bit of interest. And, IRAs offer tax advantages that can help pay for major life events, like purchasing a home or car. Find a good savings account—one with a low interest rate—to protect you from unexpected and costly events.

Begin with an automatic deposit that takes a small amount from your paycheck and deposits it into your savings account. Over time, gradually increase the recurring amount. Soon, you won’t even miss the money and it will pile up without you having to do anything! Try not to dip into this account unless it’s absolutely necessary.

Savings accounts are important, but they're not the only way to achieve financial goals. Investing, which involves a bit more risk but has a higher rate of return, is a critical component of any long-term strategy.

Then comes investing
When we say investing, many people immediately picture the hard-hitting, fast-paced scenarios you see in movies and on television. But it’s not always that intense.

Certain savings accounts, like IRAs and certificate accounts, are similar to investments because they earn dividends over time—meaning your money grows simply by sitting in an account. With a little bit of risk, investing can lead to bigger payouts. The key to finding success in the hard-to-navigate world of investments is a good financial planner.

Whether you're an experienced investor or just beginning, a financial advisor can help support your financial goals and bring clarity. You’ll receive guidance to holistically evaluate issues you may not have thought about with your income, savings, retirement plans, college plans, estate goals and contingency fund.

Work with your financial institution to find an advisor who can give you comprehensive money advice, diversify your portfolio and manage emotions while keeping a long-term strategy on track.