The value of your investment can go down as well as up and you may get back less than you paid in. Laws and tax rules may change in the future. Your own circumstances and where you live in the UK also have an impact on tax treatment.

It can be easy to get the terms 'saving' and 'investing' confused because they're often used in place of each other when talking about finances. And although they both aim to grow your money, there are some important differences.

What is saving?

  • You put your money into a bank or building society account, or a cash Individual Savings Account (ISA)
  • You're paid interest on the money you save. This is paid without any tax being deducted, but you may have to pay tax on it depending on your personal circumstances
  • If you save into a cash ISA, you don't pay tax on any interest you earn. But there's a limit to how much you can save into it (known as an ISA allowance)
  • You can save for as long or as little time as you want and you'll usually have instant access to your money unless you've opted for a fixed term account

Pro: Your money is relatively secure, and you can access it whenever you like unless you've chosen a fixed term account

Con: The interest you get probably won't grow in value in real terms as it may not be rising at the same rate as inflation. So your money won't be able to buy you the same in the future. That's because prices of everyday goods increase over time in line with inflation. If your money isn't growing at the same rate, you won't be able to buy as much with it

What is investing?

  • You put your money directly into investments such as stocks and shares or bonds, or indirectly through funds, with the aim of growing the value of your money
  • There's more potential for your money to grow in value than if you put it in a bank or a building society account or cash ISA, although there's also more risk of it falling in value too
  • You should usually keep your money invested for at least five years. And when investing in a pension plan, it's likely to be for a much longer time frame 
  • Pension plans and stocks & shares ISAs are tax-efficient ways of investing
  • With a stocks & shares ISA you can cash in your investments at any time. With a pension plan you can usually access your money when you reach age 55 (subject to change in the future)

Pro: Your money has more potential to grow in value and beat inflation over the medium to long term (at least five years)

Con: How much the value of your investment changes depends on a number of different factors, including where and how you've chosen to invest

Getting the right balance

Whether you choose to save or invest will largely depend on your financial goals. And it doesn't always have to be a choice between the two - it can be a blend of both.

Overall, if you need to access your money in anything less than five years, saving may be a better option that investing. Your money is generally secure in a bank or building society, whereas there are risks involved with investing. But if you're saving up for events happening further in the future (such as retirement) then investing might be the right choice.

Your investment options

You have options when it comes to investing money with Standard Life. Learn more about these here:

Apply for an ISA

Choose from two investment options to help you save money in the longer term. Find out more.

See ISA investment options

Get a pension plan

Invest money to help you pay for life after work. Learn more about our pension investment options here.

Compare pension investment options
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More about investments

We have many guides, tools and articles that can help you understand investing and support your long term investment goals.