8 min read

Saving vs. investing: what to do with your money

Frankie Jones
11 April 2019

Saving money: it’s one of those things you know you probably should be doing, but you keep putting it off. Why put money aside for what may happen in the future, when you could buy that car or book that holiday right now? We’re hard-wired to opt for short-term satisfaction over long-term happiness (which is probably why nearly 20% of people have no savings to speak of.) But putting aside a bit of cash is always a good idea. Whether this is for retirement, to make sure you’re covered for any unexpected costs or just to have money on hand for larger purchases, saving is a great way to ensure financial security, freedom and peace of mind.

If you’re making the effort to save, you deserve the best possible returns on your hard-earned cash. But how can you get more bang for your buck? You can either put your cash in a savings account, or invest it. Which you choose is up to you, but it helps to base your decision on your savings goal. Think about how much you’d like to save, and whether you’re saving for the short-term (less than five years) or long-term (more than five years). Now let’s look at when investing or saving might be the better choice for you.

You might prefer to invest if you…

Don’t mind taking risks

The key difference between investing your money and keeping it in a savings account is that when you invest, your money is at risk. With a savings account, your money might not grow at the same pace as it could if you invested it, but you’ll never lose it. When you invest, your money can fluctuate with the market, and if the market dips, you might get back less than what you put in. On the other hand, your money could grow far quicker than it would in a savings account - it’s all about managing the risk and knowing what you’re doing before you get started. Have a read of our beginner's guide to investing if you’re keen to learn the ropes.

Because of the risk investing your money can present, before you dive in head first, it’s worth repaying any debt and making sure you have enough cash saved up to cover 3 months' expenses.

Are saving for the long-term

Investing is not considered a short-term option. The stock market tends to do better than cash accounts in the long-term, meaning you could get much better returns on your money.

If you’re looking to grow your money over a period of 5 years or more, you might be better off investing it rather than stashing it in a savings account. This is because savings accounts rarely offer high enough interest rates to bring the overall interest earned over time in line with the interest you could earn if your investments start to pay off. (Some savings accounts do, however, offer higher interest rates for long-term savers. For example, ISAs tend to offer attractive interest rates if you’re prepared to lock your money away for a fixed amount of time.)

Because the stock market fluctuates, be wary of withdrawing your money at the first sign of poor performance - the best investors are good at riding out temporary fluctuations in the market.

Top tip: spread your money across a diverse investment portfolio, so if one area struggles, your other investments have a better chance of balancing the risk. Nutmeg's experts can help you build and manage a varied portfolio that’s tailored to your goals."

You might prefer a savings account if you…

Want to grow your money at a steady rate

Savings accounts are a great option for people who want to watch their money grow without the risk posed by investing your money. Your savings will grow at a set rate, depending on the interest rate offered with your account. You’ll want to consider the interest rate when comparing savings accounts, as this can drastically vary between different providers. The current political and economic turmoil means rates aren’t as good as they could be, but that shouldn’t put you off opening a savings account.

Are flexible with your savings goal

Not all savings accounts are created equal: different accounts are good for different things. For example, if your goal is to save enough for an emergency fund for whatever life throws at you, you might be best off keeping your money in an easy access account so you can withdraw it whenever you need it. But if your goal is to save for a house deposit over five years, then a fixed term account that offers higher interest rates might be better for you. Take a look at this article comparing 5 different types of savings account to check out the pros and cons of each.

Want easy access to your cash

Unlike investing, where you might have to wait a number of days for your investments to sell, if you open an easy access savings account you can get hold of your money pretty much instantly. This is particularly handy if you’re saving for something in the short-term, or if you’re saving for unexpected life events or a ‘rainy day’ fund. If your car breaks down or you need an emergency boiler repair, being able to dip into your savings account might be a lifesaver. With most savings accounts being online, you can check your balance and access your cash any time, anywhere.

Of course, the downside to easy access savings accounts is that they offer notoriously low interest rates. If you want better returns on your cash and don’t mind tying your cash up for a while, it’s worth shopping around for a savings account with a higher interest rate. You might like this list of the best high interest savings accounts.

See a range of savings accounts suited to you

Start making money today

If you’re interested in investing, head to Nutmeg to get started. If you’re not sure which investment is right for you, book a free 15 minute call with one of their financial advisors for tailored investing advice.

If you’re interested in opening a savings account, you’ve come to the right place. We’ve partnered with Raisin UK, a leading savings marketplace. They make saving money easy and painless, giving you back more of your precious time. Once you’ve registered, you’ll never have to fill out an application form again, and you can manage all of your accounts in one place.

With Raisin UK, you can apply for a range of fixed-term ISAs from a range of banks. As with all ISAs, you can invest up to £20,000 a year into a fixed-term ISA, but they tend to offer better returns on your money than regular cash ISAs. The difference is that you have to lock your savings away for an agreed period of time, rather than accessing your money instantly as you would with a cash ISA.

Your money is safe and secure
All savings accounts available with Raisin UK are protected by either the Financial Services Compensation Scheme (FSCS) or the European Deposit Guarantee Scheme.

How it works:

Step 1: Visit your ‘Savings’ offers in ClearScore, where you’ll be taken to Raisin UK’s website.

Step 2: Enter the amount of money you’d like to save, and how long you’re happy to lock it away for.

Step 3: Browse a range of savings products suited to you - once you’ve found the right one, log into your Raisin UK account to apply. Simply deposit the amount you’re prepared to save into your account, and they’ll take care of the rest.

by Frankie Jones

Frankie Jones is ClearScore's in-house Copywriter. 

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