Saving vs Investing: What’s the Difference?

In either case, you’re taking money and putting it somewhere for a while. But here’s the difference:

• Investing is putting money into an asset or fund with the hopes it will grow over time, at which point you can sell your investment and profit.
• Saving is putting money into an account where it won’t be spent until such time as it’s needed, at which point you can withdraw it.

For the purposes of this article, we’re going to consider investing to be putting money into a fund, stocks, or other growth asset. We’ll define saving as keeping accessible money aside for a rainy day – whether that’s in a bank account, credit union, or stuffed into a mattress.

On the other hand, money that you save is unlikely to ever grow. You may get a small return from the company or institution holding your cash, but chances are that money will still be eroded by inflation over time.

Both investing and saving can be part of a holistic financial health plan.

Investing promotes long-term growth (hopefully!) but saving is vital too. The benefit of saving is that the money is right there when you need it. Saving is for your rainy day fund whereas investing is (to stretch a metaphor) for building flood defence systems for a city. It takes time.

It’s important to make sure you have some money in savings before you think about investing. This should be enough to cover immediate expenses (we call this an emergency fund) and be cash you can easily get.

This is because of the obvious potential downside to investing: while you may get a return on your investment, there is a risk that you will lose some or all of your money.

Saving is all about peace of mind and accessibility. When you save, your money is always there for you. Life is full of surprises, and savings are perfect for unexpected expenses – like if your car breaks down or if you need to pay for a trip to the vet. When these sudden costs appear, your savings cushion the blow. 

Having some savings can reduce your day-to-day stress. When you're in the habit of setting some money aside, you don't have to worry as much about these unexpected emergencies and costs. This can help you feel generally more safe and secure. 

Saving is also the first step towards building smart financial habits. Whether you can put aside a large portion of your pay or just a little bit every week, it’s a positive start. 

You can first build an emergency fund to cushion the blow of unexpected costs, and sustain that habit to put money aside for larger planned expenses – whether that’s a house deposit or a big holiday.

If you had €5,000 in a bank account in 2014, that same €5,000 was worth less than €3,900 in 2024[2]. The purchasing power of the money has decreased thanks to inflation, and your money has actually lost value.

In fact, that €24 billion saved in 2024 will be worth “only” €19.6 billion after a decade of inflation at just 2% per year. Almost €5,000,000,000 is a lot of cash to be eroded away!

Money is (presumably) a hugely important part of your life. 

Even if you’re not a money-driven person, the reality is that (unless you’re on a self-sufficient smallholding using your own wind turbine to power a modem to read this article) you need it to survive. But do you ever stop to think about what it actually is?

Money is just a medium of exchange. We swap our time and skills for a salary, which we then swap for shelter, food, and goods and services.

Before money, a chicken farmer who wanted a haircut needed to find a barber who wanted eggs. As society evolved, bartering became impractical, and money is now a common thing that enables society to work effectively.

Hopefully you can see money is only worth what you can exchange it for. If you think of money as simply “a thing” then the €100 you have in a bank account 20 years ago is the same as €100 in your bank account today.

But 20 years ago, that €100 might have paid for a weekend away. Today, you’ll be lucky to have a good night out with it. 

This is why it’s important to focus not just on the number on your bank statement. This leads us to…

A lot of people don’t feel confident with investing. Too much information and complexity leads to this low confidence – unfortunately, finance and investment is often presented and perceived as being very complex.

It isn’t. Not for ordinary people, anyway.

If you’re looking to begin investing then there are two ways to go about it with Irish Life:

• Use Smart Invest and invest easily online or via your mobile device. Smart Invest is provided by Irish Life Financial Services and Irish Life Assurance and is available to residents in Ireland aged 18 to 59.
• Speak to a financial advisor for free to discuss your investment options.

Most people know that investment comes with risk attached, but the potential upside of investing makes it a smart financial decision for those in the position to afford it. When investing regularly and sensibly over a long period (we’re not talking months, but years – if not decades) the returns can far outpace inflation.

Ins short, investing gives your money the chance to work for you rather than just sitting in an account.

This means that investing is only a sensible option for somebody who has everything else sorted financially. If you have an emergency fund, you’re contributing to a pension, and you’ve got your life insurance and other financial essentials sorted, then you’re in the perfect position to invest any spare cash.

If you have a handle on your budget, you’ve built a solid emergency fund, you’re making the most of your pension, and you’re covered for the unexpected, then congratulations. You could be in a place to invest any extra income and try to start making your money work for you – speak to a financial advisor for free and see whether or not investing is right for you.