Starting to save is an important habit and a cornerstone of good financial planning. Keeping money in savings gives you security and peace of mind. But relying on savings alone could mean your money isn’t working as hard as it could be. Investing helps grow your wealth over time but knowing how much to save v invest is where a lot of people get stuck.
When it comes to saving and investing, it’s natural to have questions. Whether you’re just getting started, building momentum, or reviewing your current plan, knowing what to do isn’t always straightforward.
Here are share some of the most common saving and investing questions we’re asked, and the answers we give.
What’s the difference between saving and investing?
We’re often asked this question. And the answer is simple.
Saving is about safety and easy access to money you might need soon. It’s often more about putting a little aside regularly. Investing is about growing your wealth over the longer term, with a higher level of risk but also the potential for higher returns. It’s more often associated with having a lump sum to put aside.
A robust financial plan will include both depending on your goals, timeline, and comfort with risk. It’s about finding the right balance between the two.
I have a lump sum to invest, where do I start?
A lump sum gives you an opportunity to put your money to work harder. And where you start again depends on your goals. We’ll ask you questions like: Can you put this money aside for a short or longer timeframe? Do you have a specific objective in mind? What is your attitude to risk?
Once you understand your risk profile, timeline and set your goals, there are different options available, so your money is working in the right way for you. More importantly too at a risk level that you are comfortable with in relation to the goals you have set.
How do I start saving for my children’s education?
Many of our clients set saving for education as a financial goal. The cost of education is rising, right through from primary and secondary school through to college, the total cost can be significant.
So the earlier you start saving for your children’s education, the easier it is to reach your goal. Remember even a small, regular amount can grow over time and benefit from compounding. It’s about starting when they are young so the investment has sufficient time to grow.
Is there a better option than a deposit account for my savings?
If you’re putting money aside, a deposit account might feel like the safest option. But as we’ve seen with inflation, your savings may not grow as much as you’d like. In fact they may actually be eroded! There are other choices, from notice and regular saver accounts to investment options that offer the potential for higher returns.
This all depends on how comfortable you are with risk and how long you can put your money away for. Everyone’s goals and circumstances are different, and the right mix can make a big difference over time.
When should I start investing instead of saving?
This is a common question, particularly when some savings have already been built up. In general, saving comes first. It’s important to have a financial cushion in place for short-term needs and unexpected expenses. Whether this is for a new car, holiday or a
Once that’s in place, investing can be a way to grow your money over the longer term.
The timing depends on your goals, your financial position, and how comfortable you are with risk. For many people, it’s not about choosing one or the other, but gradually doing both.
What’s the best way to balance short-term and long-term goals?
Balancing today’s needs with tomorrow’s plans can feel challenging. But it’s a key part of any financial plan. Short-term goals might include building an emergency fund or saving for a large purchase. Longer-term goals could be things like education costs or future financial security.
The key is to prioritise what matters most to you and align your savings and investments accordingly. Taking into account the other elements of your overall plan including pension and protection needs.
Look at how you are spreading your money across different elements of your plan and timeframes and adjust so that you can make progress towards multiple goals without losing focus on what’s important.
Putting a little aside on a regular basis is the first step in saving and investing. But there’s lots more you can do to make your money work hard for you. For help on where to start book a financial review with us, we’ll help you plan for today, tomorrow and into the future.
