Saving or Investing – which is more important?

The comparison between saving and investing has gone on for a long time. Some entrepreneurs even directly condone the practice of saving over investing.

Furthermore, the question of which is ‘better’ can lead to confusion because many people are of the assumption that saving and investing are both the same thing. While there may be a correlation between the two, they aren’t exactly the same. There are different objectives and a variety of finance-related aspects that come into play.

One of the biggest questions people may ask is probably which one is more important?

Let’s delve into core differences before attempting to discuss which one may be more important.

saving and investing

Saving is essentially the act of accumulating money

When you save your money, it generally means that you’re restricting your expenses and keeping cash that hasn’t been spent on anything with the long-term purpose of accumulating it. This is the gist of saving. The main point is to maintain liquidity which could help you during tough financial situations (if, for instance, you get fired from your job and need to survive until you find another). Short to medium term expenses can be managed with the money you’ve saved.

Investing entails buying assets for financial return

When you invest your money, the process generally involves buying assets with the aim of generating financial returns over a period of time. Investing often comes with risk and volatility, so the process of managing these is also part and parcel of investing. There are many investment vehicles to choose from (conventional methods include buying mutual funds, acquiring property, or purchasing bonds and shares). Your main focus here is probably on beating the inflation rate through wide margins

They are both involved in the wealth-building process

It’s ironic that there’s this rift between saving and investing (as if they are two concepts are rivals that conflict each other in a major way). There are videos circulating online about how saving is for “losers” or how saving is a terrible way to build wealth. The fact is that they are both equally important to the wealth-building process. It’s pretty obvious if you think about it as a two-step move; how will you invest your money if you have nothing saved up?

The truth is that investment is often a follow up to the accumulation of cash (aka saving). Unless you already have your hands on a huge pile of money, it’s important that you restrict your expenses, gradually setting aside some of your income and accumulating a substantial base of funds with which to begin your investing and wealth management journey.

Saving can help you improve your mindset

Saving money is good practice for a variety of reasons. For one, it teaches you about financial discipline (something you can’t do without when you begin investing). Once saving becomes a routine and a habit, you’re not likely to overspend money once it is in your hands. This mindset can be tremendously helpful for those who wish to optimize resources and go on the offence with regards to business and investment.

Money can lose its value over time

The nature of our economic system leads to a loss of value in liquid cash over time. Once you save up money, its value begins to erode due to inflation. If you’re really determined to grow your money, it may not be a good idea to save money and stop there. In order to maintain and ultimately grow the value of your monetary wealth, it’s important that you invest it in a higher return asset. Truly wealthy individuals understand the aspect of investing in assets to maintain and manage financial health. In this instance, you could say that investing is the final phase to secure financial empowerment.

Get your house in order before the switch

Before you can even think about transitioning from saving to investing, it’s important that you have all your financial requirements in order. Savings are extremely important for the securing of expenses and dealing with uncertainties. Savings can also help with loan installments, credit card payments, utilities, insurance payments and rent. Once you have a clearer idea of what your surplus is, only then can you properly divert the remainder of your cash into investment assets.

Saving and investing your money doesn’t have to be complicated, but it can get a little overwhelming. In fact, there are certain factors on both sides of the spectrum that can be tricky to manage if you don’t have experience.

Here in Hampton Wealth, we are a group of advisors with many years of experience under our belts and with clients all over the world. We can help you plan for the future for yourself and your family through our customised and detailed projection report that can help you see what is required to have a peace of mind in the years to come. Get in touch with us today and schedule a call to find out how we can help you.


Hampton Wealth specialises in sourcing high quality, listed bonds and funds with a focus on providing returns in excess of normal off the shelf investment options.

Contact us today to find out more

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