Saving vs. Investing

7 Minutes Read

Choose the best tactic for your personal finance goals.


When you imagine the future, what do you see? Are you taking a tropical vacation, buying your first home, or kicking back in retirement? If you’re wondering how to make these milestones more than a daydream, this blog is for you. Saving and investing are vehicles that can help you reach your financial goals, whatever they may be.

You’re probably asking: where do I start? Which is better — saving or investing? 

Spoiler alert: there’s a place for both, no matter what stage of life you’re in. Keep reading to learn when to save and when to invest.



What’s the difference between saving and investing?



Saving and investing share the common goal of accumulating money, they just have different ways of getting there. Both involve putting money away for the future – the difference lies in exactly how far into the future your goals are and the amount of risk you’re willing to take on.

Saving means setting money aside somewhere easily accessible, like a savings account with your bank. You can withdraw savings at any time, without the risk that the money won’t be there when you need it (unless you’ve already withdrawn some, of course!).

On the other hand, investing means putting your money to work by purchasing an asset or security (like stocks or real estate) with the expectation that your investment will grow in value over time. Of course, this could mean not being able to convert your investment back into cash quickly (ie. lacking liquidity) or selling your investment for less than you originally paid. 

At the end of the day, investing involves risk but offers a chance at big returns – you could end up with more money than when you started. Saving has virtually no risk but you’re unlikely to multiply your funds by much – or at all. 


When to save...



Savings are great for immediate – or near future – expenses, like a furnace replacement or tuition fees. You should always have some savings tucked away for an emergency as well. In fact, experts recommend having 3-6 months worth of expenses saved up, just in case. 

There are a couple of reasons savings work best for short-term goals and rainy days.

  1. Savings are liquid, which means you can access your money whenever you want. Sometimes you just need funds right away – and it’s not always easy to sell assets and securities.

    Also, because savings stay relatively consistent over time, there aren’t usually any surprises when you withdraw them – and withdrawing early won’t hurt a future payout.

  2. Inflation is working against you and your savings may not be as valuable long term.
    We have an entire blog on the relationship between inflation and interest rates but to summarize: every year most things get a little more expensive and as a result your money is worth a little bit less.

    If your interest rate isn’t high enough to outweigh the effects of inflation, it’s hard to grow your money over the long term. Add fees into the mix and your savings may not be growing at all. It makes sense to use your savings before inflation can eat away at its value

One big benefit of saving is just how easy it is. There usually isn’t an upfront cost or learning curve and it doesn’t require constant attention or adjustment. The hardest part is resisting spending (which, I know, can definitely be tough). 

If you’re wondering how much you should be saving vs. investing, ask yourself:

  • Which expenses are coming up in the next 3, 6 and 12 months
  • The total cost of your short-term goals
  • Whether you have enough money in your emergency fund

How can I save my money?


Savings accounts

While savings won’t grow at the same rate as investments, there’s still one reason (okay, probably more than one) to put your money in a bank account instead of under your mattress. What am I talking about? Compound interest!

Savings accounts typically pay interest on the money you deposit — but that’s not all. Sometimes, interest is also paid on the interest you’ve already earned, giving your savings a helping hand. This comes in handy if you’re saving for something specific in the next few years, or if you need to beef up your emergency fund – your money will keep growing until you need it. 

Just keep in mind that you do have to pay income tax on your interest – unless, of course, you keep your savings in a Tax-Free Savings Account (TFSA).

Savings accounts are an important source of funds for a bank, who lend that money to other people who want to borrow it.

Some savings accounts require a minimum balance and limit your withdrawals to avoid monthly fees – and the interest rate for each savings account may vary. Changes in the overnight rate can also have an affect on your interest rate — check out this blog for how that works.

All of this makes it important to evaluate the different options out there to make an informed decision about which account will work best for what you need.


When to invest...



Investing typically involves buying an asset or security with the expectation it’ll increase in value – earning you money over time. This is a faster way to grow your funds than letting them sit in a savings account. Investing is usually the most effective option for achieving long-term goals, like saving for retirement or for your child’s education. Here’s why:

  1. While many investments – like ETFS – are fairly liquid, meaning you can easily convert them into cash within a business day or two, that’s not true for all investments. Sometimes, withdrawing your funds can be a hassle, which isn’t great if you need your money right away.

    Additionally, because your investment may change in value over time, you could end up with a loss if you’re forced to sell your investment too early. A long-term, passive strategy gives your investment time to recover from any downturns in the market.

  2. Unlike your savings, your investments may be able to keep pace with inflation. Like we mentioned earlier, your money today might not be worth as much in the future because of inflation. This makes saving for the long-term difficult. When you invest, there’s a chance your returns will be higher than the rate of inflation. 

Investing may be better-suited for long-term goals than saving, but this option has some drawbacks as well. Fees can be higher for investments compared to savings accounts, depending on what investment product you use. Of course, this isn’t always the case — Flahmingo offers commission-free fractional investing.

Additionally, returns aren’t always guaranteed and there’s a chance you will lose money — for example, holding onto stocks for the long term might cause you to miss out on short-term gains. Also, depending on the direction of the economy, you might not get back what you initially invested.

Investing can be complicated and sometimes requires expert help – or the time and effort of teaching yourself the ins and outs. That’s why we write these blogs — to help you increase your financial literacy and make informed decisions.

If you’re wondering how much you should be investing vs. saving, ask yourself:

  • What your goals are in the next 5, 10 and 25 years
  • How much money you’d like to have saved for retirement
  • How much risk you feel comfortable taking on

How can I invest my money?




Buying a company’s stock makes you a shareholder and a fractional owner of that company. Shareholders have many rights, including being able to vote on the company’s board of directors. Shareholders also benefit when the company grows — you can receive dividends (a distribution of profits) or cash from selling your shares for more than you bought them for.

Need more details? We have a blog that goes in-depth on the stock market.



A bond is a loan from an investor (like you) to a borrower (typically a large corporation or a government). The borrower uses the money to fund operations or expenses and the investor receives interest on the investment.

Bonds work by paying the investor a regular amount known as the coupon rate, which is why they’re referred to as a fixed-income security. All the details of a bond are known when purchasing – including the maturity date, coupon rate, and payment amount.

The risk level of a bond depends on how trustworthy the issuer’s credit is – and lower-risk bonds pay lower interest rates. Although they’re considered safer than stocks, bonds carry the risk that the borrower will go bankrupt before paying off the debt.

Bonds generally offer lower returns and carry less risk than stocks, which makes them popular with older age groups who have less time to wait out the volatility of the stock market.



Funds are investments that pool money together from multiple investors and allow them to invest in stocks, bonds, commodities, etc. The most common types of funds are mutual funds, index funds, and exchange-traded funds (or ETFs). These are often actively managed by a portfolio manager, which means they usually come with fees.

Our blog on index funds walks through what these funds are and how they work.


Registered plans

Other forms of investing include real estate, hedge funds, cryptocurrency, collectors items, and many many more.


So which is better — saving or investing?



Hopefully you can see that neither saving or investing is better in all circumstances — ultimately, the right choice depends on your financial position and goals.


When to save:

  • If you need money for a purchase in the next few months or years
  • If you don’t have an emergency fund yet (ideally you’d have an emergency fund before you get started investing — just in case)
  • If you have a lot of high-interest debt like a high credit card balance or a loan, saving might better suited for you so you can pay them down before getting heavily involved in investing

When to invest:

Our blog on life-long investing is worth the read for identifying your investment goals at different stages in your life but generally you should think about investing:

  • If you have long-term goals like saving for retirement, helping a child through university, or buying a home
  • If you’re comfortable with taking some risk
  • If you’ve started contributing to your emergency fund and paying down high-interest debt

Investing is better for money you want to grow more aggressively and hold on to for a long time. The longer you can keep your money in investments, the more time you have to ride out the ups and downs of financial markets.


To summarize…


saving vs investing timetable copy

Saving and investing are really two sides of the same coin. Both are equally important and provide the greatest benefits when done together.

Remember: time is an opportunity to grow your money and meet your goals. It only takes $1 USD to start your investing journey with Flahmingo, meaning you don’t need to save up before you invest. Future you will thank you!

Melissa Atefi