What is the difference between saving and investing?

Key takeaways

  • Saving and investing are not the same thing. 
  • Saving is setting money aside for things you need to pay for in the near future.
  • Savings are typically accessible and unlikely to earn interest that beats inflation and tax.
  • Investments should be made for longer periods that enable you to beat inflation and tax and to harness the power of compounding.
  • You should have savings for your shorter-term goals and investments for your longer-term goals.

Saving is the act of delaying immediate spending until you accumulate enough to spend on something more worthwhile in future.

We often speak about saving and investing as if they are the same thing, because when you invest you also delay spending to accumulate more for something worthwhile in the future.

However, it is more useful to think of savings as money you set aside for things you need to pay for in the near future or for financial emergencies in an emergency fund. Your savings should be for shorter-term goals or money you may need to access quickly.

Earning interest

Typically, you will save in a bank savings account or in a fund or account invested in the money market.

You may earn interest on your savings, but the interest may not be enough to give you growth after inflation and tax. You trade off a lower after-inflation or real return, for the liquidity or ready access that money in a bank savings account can give you.


Returns over the past 94 years show that it would take

87 years to double the real (after-inflation) value of your money if you invested in cash

10 years to double the real (after-inflation value) of your money if you invested in equites (shares).




Source: Old Mutual Long Term Perspectives 2024

You will struggle to grow savings in a bank savings account, or in a money market fund, to provide for long-term goals like the education of a child or your retirement.

When you invest, however, you put your money in unit trust funds, shares, bonds or listed property with a view to growing your money with inflation-beating returns that can harness the power of compounding over longer periods.   

You have to be willing to commit to your investments for a reasonable period of time, depending on how much investment risk you are taking.

Investment terms for funds that invest in shares are between five and 10 years, but there may be times when you need to wait longer to get good real returns.

Save or invest?
Should you save or invest? You need both. A bank savings account or money market fund is good for shorter-term goals, like saving to buy a new fridge at the end of the year, or to have readily accessible money in the event of an emergency.

Stokvels too are good for saving for short-term goals such as Christmas spending, but the stokvels that are making a big long-term difference to members’ lives are those that are investing contributions for growth.  

You can save or invest for goals such as a holiday or a wedding, depending on how much time you have and how much risk you can take.

Long-term goals such as saving for retirement, or the tertiary education of your children, need investments and long-time horizons.