Home / Sections / Financial Topics / What’s the Difference Between Saving and Investing?

What’s the Difference Between Saving and Investing?


By: Jan Paul C. Ferrer


Saving and investing are two very different fi nancial strategies. Once you understand the difference between saving and investing, you may do a better job of managing your money. Why? You’ll have a better grasp on when it’s appropriate to save money, when it’s better to invest, and which fi nancial products are right for each goal.

What Is Saving?

Saving essentially means storing your money to use in the fairly near future. You might deposit this money into a bank savings account.

What Are the Advantages of Putting Money Into Savings?

Saving is a good strategy if you’ll need your money in a short time. You may earn some interest on your balance, but not much.1 More important reasons to put money into savings might be that you:

• Won’t lose money: In most cases, savings accounts are insured against loss by organizations like the Federal Deposit Insurance Corporation (FDIC).

• Can access your money quickly: When you need your money, you can usually withdraw it without any fi nancial penalty up to a certain number of withdrawals per month, after which you may have to pay a fee.

What Are the Risks?

Your money may not earn the highest potential yield. In fact, if your savings interest rate doesn’t keep up with the average cost of living, you lose some of your money’s buying power over time.

What Financial Goals Call for Saving Rather Than Investing?

Consider putting money into a savings-type account if you need it within in a short time. A typical market cycle is fi ve to seven years, so if you need the money in less time than that, it’s a good idea to put it in a savings account. Saving is also a good strategy if you plan to completely fund the goal yourself, and don’t need to rely on your money growing signifi cantly.

• Examples of savings goals include:

• Car down payment

• Vacation money

• Down payment for a home you’ll buy in seven years or less

• Home improvement projects

What Financial Accounts Should You Consider for Storing Savings

Typical savings options include:

• Bank/credit union savings accounts

• Interest-earning checking accounts

• Money market accounts

• Certifi cates of Deposit (CDs)

• U.S. Treasury bills and savings bonds

What is investing?

When you invest, you expect to earn money on your investments over time—more than you could earn with a savings account. Because investments, such as stocks, bonds and mutual funds, are connected to the fi nancial markets, your account values may go up and down according to changes in the economy.

What are the advantages of putting money into investments?

Investing is often a smart strategy for achieving longer-term fi nancial goals. Because you won’t need your money right away, you can afford for your investments to fl uctuate in value. In addition, you can:

• Give your fi nancial goals a head start: Investing may help you earn more money in returns than you could just by saving.

• Participate in global fi nancial markets: Even if you don’t own a profi table, global business, you can share in its success. How? By buying a company’s stock or owning a mutual fund that invests in companies.

What are the risks?

Investments may climb in value when fi nancial markets are doing well, the economy is improving, or a company’s profi ts are growing. However, investments can also lose money when the market declines or a company’s performance slumps. It’s possible to choose low-risk investments. However, they usually earn less over time.

What fi nancial goals might require investing instead of saving?

Investing can be a good approach when you have longer-term fi nancial goals or need to earn signifi cantly more money than you could by saving it. Consider investing for:

• Retirement

• College costs

• Down payment for a house you plan to buy in 10+ years

• Starting a business

• Leaving a fi nancial legacy for your family

What types of fi nancial products or assets are considered investments?

Common investment options include:

• Stocks

• Bonds

• Mutual funds

• Exchange-traded funds (ETFs)

• Real estate

• Real estate investment trusts (REITs)

A healthy mix of saving and investing

Most people benefi t from both saving and investing. For instance, you might store money in a savings account for your end-of-year property tax payments or next summer’s vacation. At the same time, you might invest money you’ve earmarked for a future business opportunity and for retirement.

Once you’re clear on the pros and cons of saving and investing, you’re in good shape to choose the best accounts to help meet your fi nancial goals.

1 As of November 4, 2019, .09 percent. https://www.fdic.gov/ regulations/resources/rates/

Important Disclosures:

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Jan Paul C. Ferrer is a Financial Advisor in Chicago, IL at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at janpaul.ferrer@ morganstanley.com or by telephone at 312 312-419-3535. https://advisor. morganstanley.com/janpaul. ferrer

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual fi nancial circumstances and objectives of persons who receive it.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affi liates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fi duciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www. morganstanley.com/disclosures/ dol . Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

The strategies and/or investments discussed in this material may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Investors should carefully consider the investment objectives, risks, charges and expenses of a mutual fund, ETF or REIT before investing. The prospectus contains this and other information about the investment. To obtain a prospectus, contact your Financial Advisor or visit the investment company’s website. Please read the prospectus carefully before investing.

Stocks fl uctuate in value and may be worth more or less than their original cost. Past performance is no guarantee of future results.

Under the Savings program (“Savings”), Morgan Stanley Smith Barney LLC makes available interest-bearing FDIC insured deposit accounts(s) at either Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., each a national bank, Member FDIC, and an affi liate of Morgan Stanley Smith Barney LLC, as selected by the client. Deposits placed in Savings are eligible for FDIC insurance up to $250,000 (including principal and interest) per depositor, per each bank selected by the client for all deposits held in the same insurable capacity (the Maximum Applicable Deposit Insurance Amount). All deposits per bank held in the same insurable capacity will be aggregated for purposes of the Maximum Applicable Deposit Insurance Amount, including deposits maintained through the Bank Deposit Program. You are responsible for monitoring the total amount held with each bank. The bank also reserves the right to offer promotional rates from time to time. Detailed information on federal deposit insurance coverage is available on the FDIC’s website (https:// www.fdic.gov/deposit/deposits/). The Savings program is not intended for clients who need to have frequent access to funds and those funds will not be automatically accessed to reduce a debit or margin loan in your brokerage account. Withdrawals from an account in Savings are limited to 10 transactions per calendar month, and any withdrawal or transfer over the limit in any one calendar month will be subject to an excess withdrawal fee.

©2022 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 3946123 (12/2021)

About administrator

Leave a Reply

Your email address will not be published. Required fields are marked *


Scroll To Top