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If you’re not sure whether it’s time for you to start investing, or if you should focus on saving, the answer depends on your goals, risk tolerance, and financial situation.
The difference between saving and investing
- Saving — putting money aside gradually, typically into a bank account. People generally save for a particular goal, like paying for a car, a down payment on a house, or any emergencies that might come up. Saving can also mean putting your money into products such as a bank time account (CD).
- Investing — using some of your money with the aim of helping to make it grow by buying assets that might increase in value, such as stocks, property or shares in a mutual fund.
Should you invest now or wait?
You may want to consider starting your investment strategy after you’ve:
- Built your emergency savings. Savings should come first. Before investing, try to make sure you have a separate low-risk, low-return account you can use to cover expenses during an unforeseen event — typically at least three to six months worth of living expenses.
- Paid off high-interest debt. By paying off high-interest debt in full, you’ll reduce the total amount you owe faster and free up money to put toward savings or investing.
- Maxed out your 401(k) and IRA. If your long-term goals include a comfortable retirement and you’re already contributing the maximum amount to your retirement accounts, it may be an appropriate time to explore additional investment types.
Compare saving vs. investing
Saving
- For the short term. Typically for smaller, shorter-term goals in the near future like saving for a large purchase or for an emergency.
- Ready access to cash. A savings account can give you access to cash when you need it.
- Involves minimal risk. Your funds are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
- Earn interest. You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments.
Compare savings accounts Investing
- Usually used for long-term goals. Investing may help you reach long-term goals, such as paying for a child’s education or planning for retirement.
- Longer wait to access invested funds. When you invest your money, depending on the type of investment, it may take longer to access your money compared to a savings account.
- Always involves risk. Investing does not guarantee a return, and it is possible to lose some or all of the funds invested.
- Earnings potential. Investments typically have the potential for higher return than a savings account.
Learn about investment typesGet prepared if you’re planning to invest
If it’s not time to invest yet, you may want to evaluate your financial priorities. One way is by using our My Money Map online tool — where you can track your spending, start a budget, and track savings in easy-to-understand charts.
Use My Money Map
Related Articles
- Saving for an emergency
- How to reduce your debt
- Creating a budget
Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company.
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
Wells Fargo and Company and its Affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
Investment and Insurance Products are:
- Not Insured by the FDIC or Any Federal Government Agency
- Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
- Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Retirement Professionals are registered representatives of and offer brokerage products through Wells Fargo Clearing Services, LLC (WFCS). Discussions with Retirement Professionals may lead to a referral to affiliates including Wells Fargo Bank, N.A. WFCS and its associates may receive a financial or other benefit for this referral. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.
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Information published by Wells Fargo Bank, N.A., Wells Fargo Advisors, or one of its affiliates as part of this website is published in the United States and is intended only for persons in the United States.
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FAQs
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.
What is the difference between saving and investing? ›
The difference between saving and investing
Saving can also mean putting your money into products such as a bank time account (CD). Investing — using some of your money with the aim of helping to make it grow by buying assets that might increase in value, such as stocks, property or shares in a mutual fund.
Is Wells Fargo saving account worth it? ›
The base rates offered by Wells Fargo on its savings accounts are much lower than the yields at top online banks. Wells Fargo is a large, well-known financial institution, but many other banks offer higher savings rates.
Which bank gives 7% interest on savings accounts? ›
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.
How much money do I need to invest to make $3,000 a month? ›
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
What is the 50 30 20 rule? ›
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.
What are two reasons to save instead of invest? ›
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.
Does money double every 7 years? ›
For example, the Rule of 72 states that $1 invested at an annual fixed interest rate of 10% would take 7.2 years ((72 ÷ 10) = 7.2) to grow to $2. In reality, a 10% investment will take 7.3 years to double (1.107.3 = 2).
How much cash should I keep in savings? ›
Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.
What is the downside of Wells Fargo? ›
You'll often find higher fees with Wells Fargo than with some competing banks, although in some instances, the bank will waive those fees. Also, the interest rates on its deposit accounts generally aren't as competitive as you'll find with online banks and credit unions.
What is Wells Fargo's savings interest rate? Wells Fargo's savings interest rates range from 0.01% to 2.50% APY, depending on the account type, account balance and relationship rate. The Platinum Savings account offers higher APYs for higher account balance tiers.
Can you get 7% on a CD? ›
Can You Get a 7% CD Account? There was a lot of excitement in August 2023 about a few credit unions offering 7% APYs on certificates. But those rates were offered for a limited time only and are no longer available. However, the nation's best CD rates are still well above 5%, with some pushing toward 6%.
Should savings be more than investment? ›
How much to put toward savings versus investing depends on your current needs and your future goals. If you're unable to cover three to six months' worth of expenses with savings, it's best to prioritize that before beginning to invest for long-term goals like retirement.
Should I invest or save for a house? ›
For those planning to purchase a home within the next 3 years, Fidelity suggests holding down payment cash in checking, regular savings, or high-yield savings accounts—or in cash-like investments such as money market funds or certificates of deposit (CDs) that will mature before you anticipate needing the money.
How much should you have in savings before investing? ›
Aim for building the fund to three months of expenses, then splitting your savings between a savings account and investments until you have six to eight months' worth tucked away. After that, your savings should go into retirement and other goals—investing in something that earns more than a bank account.
Is it worth putting money in a savings account? ›
A savings account is a safe place to put your money when you can't afford to lose any or think you'll need it in an emergency. It's also a good place to put some of your investments as a hedge against losses – you can't lose everything if some of your money is in an ordinary savings account, after all.
