Saving and investing – what’s the difference?

MoneyPlus Features Team

From our first piggy bank, to opening our first bank account, many of us will have vivid memories of our introduction to saving money.

And after we’ve taken a hammer to the piggy bank, the savings account is often the next meaningful step in our lifelong relationship with money.

In contrast, a survey by the Financial Conduct Authority (FCA) showed that far fewer UK adults (29%) have an investment product such as a stocks and shares ISA, compared with a savings one (72%).

Cutting through the jargon

It can be easy to confuse ‘saving’ and ‘investing’ and they’re often used in place of each other when talking about finances. And although the aim of both is to boost your wealth, they do it in quite different ways.

A September 2017 survey by HSBC found that one in five savers admitted a lack of knowledge was stopping them from investing. And almost one in 10 said they didn’t know what the first steps would be to getting started with investments.

It can be hard to cut through the jargon to understand the differences. But doing so can help you make the right decisions about your financial goals. Let’s take a closer look.


Saving is simply putting cash into a bank or building society account, or cash ISA, usually with the aim of adding to it regularly. The money you save has the chance to grow by earning interest. And if you save into a cash ISA, you don’t pay tax on any interest you earn.

You can generally save your money for as long or short a time as you want. But saving could be appropriate for short-term goals – money you’ll need within the next five years.

The main advantage of saving is that you’ll usually have instant access to your money, unless you’ve opted for a fixed term account that generally pays a higher rate of interest.

However, there’s the risk that the rate of interest you receive on your savings may be lower than the rate of inflation ‒ so your money will have less buying power if prices rise faster than your money grows. This has been the case for most savers in recent years.

The days of attractive high interest savings accounts on the high street have been replaced by low interest rates and rising inflation. In February 2017, the Moneyfacts comparison site revealed that just 23 out of 697 savings accounts were actually beating inflation.

This shows how difficult it is to find a real, inflation-beating return with traditional savings accounts. But with a recent article by The Independent reporting that more than half of UK adults wished they could put away more money – the appetite for saving is still there.


Investing gives you the potential for greater returns than those you’re likely to get by saving – although there’s also more risk of your money falling in value. And there’s no guarantee you’ll get back all the money you invested or make a profit.

Pensions and stocks and shares ISAs are the most common types of investment products, and could offer a tax-efficient home for your life savings.

Your money either goes directly into investments such as stocks and shares, bonds or property, or indirectly into these investments through funds.

Laws and tax rules may change and your personal circumstances will have an impact on tax treatment.

Investing could be more appropriate for longer-term financial goals of at least five years. However, investing in a pension is likely to be for a much longer time, as you can normally only access your pension savings from age 55 (may be subject to change).

Get the right balance

Whether you choose to save or invest will largely depend on your financial goals. But it doesn’t have to be a choice between the two – it can be about the right blend of both.

Over the short term, a savings account could help if you’re saving up for that special something or make it easier to meet emergency expenses. And having that reassurance, could give you the confidence and freedom to stick with your longer-term investment goals.

You can get more information about the different types of savings accounts and getting started with investing at the Money Advice Service.

At, we also have a wealth of information and guides to help you make the most of your finances.

You can find out more about how pensions can be a long-term, tax-efficient way to save, read our guide to getting started with investments and explore our stocks and shares ISAs to find the right one for you.

Whatever your financial goals are, we’re here to help you take the next step.


The information here should not be regarded as financial advice and is based on our understanding in July 2018. Remember that the value of your investment can go down as well as up and may be worth less than you paid in. Laws and tax rules may change in the future.