Saving vs Investing | Wells Fargo (2024)

FAQs

What is the difference between saving and investing your answer? ›

Saving is putting aside money to reach your goals. Investing is putting your money into something specific with the expectation that its value will grow over time, providing you with the opportunity to create more wealth.

Saving is generally seen as preferable for investors with short-term financial goals, a low risk tolerance, or those in need of an emergency fund. Investing may be the best option for people who already have a rainy-day fund and are focused on longer-term financial goals or those who have a higher risk tolerance.

As of May 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

Saving provides a safety net and a way to achieve short-term goals, while investing has the potential for higher long-term returns and can help achieve long-term financial goals. However, investing also comes with the risk of losing money.

What is the difference between saving and investing? Saving you are putting money away to keep and use later. Investing you are putting money in, hoping that it will increase.

The key difference is this: When you save money, you're putting your money somewhere safe to use for the future, often for short-term goals. Alternatively, when you invest money, you accept a greater potential risk in return for a greater potential reward. Investing often makes more sense for long-term goals.

Saving typically results in you earning a lower return but with virtually no risk. In contrast, investing allows you the opportunity to earn a higher return, but you take on the risk of loss in order to do so.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

If you're 30 and wondering how much you should have saved, experts say this is the age where you should have the equivalent of one year's worth of your salary in the bank. So if you're making $50,000, that's the amount of money you should have saved by 30.

Saving refers to an activity occurring over time, a flow variable, whereas savings refers to something that exists at any one time, a stock variable. This distinction is often misunderstood, and even professional economists and investment professionals will often refer to "saving" as "savings".

What are the main differences between saving and investing in Ramsey Classroom? ›

You save money you plan to use in five years or less—for a phone, a car, or even college (if you're planning to go less than five years from now). When you invest, on the other hand, you do it for longer than five years—like 20-30 years or even longer.

By definition, saving is income minus spending. Investment refers to physical investment, not financial investment. That saving equals investment follows from the national income equals national product identity. Consider first an economy without government.

Investing: Putting Your Money to Work for You

Investing, on the other hand, involves putting your money into financial instruments like stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Investing is riskier than saving, but can also earn higher returns over the long term.