Saving or investing: Which is best for you?

Saving and investing are two important financial concepts that can help you get closer to your goals, but they’re not the same thing. Understanding their key differences can help you plan for the future, so we’ll break down their distinct benefits, when to partake in each, and how MoneyLion can help you start investing with a fully-managed investment account.

How saving and investing are different

Saving is putting aside money for the future — whether that’s for buying a car, putting a down payment on a home, or taking that much-needed vacay you’ve been dreaming about. It can also provide a cushion for emergencies. When you’re planning your savings, it’s important to consider the value of your goals and when you’d like to achieve them. 

Investing is allocating resources — usually money — with the expectation of getting a profit. This could be anything from purchasing a company’s stock to buying a home with the hope of re-selling it for a higher price and more. Unlike saving, there is risk involved with investing. Your investments might rise or fall depending on market conditions. Plus, the money in a savings account is more readily available than in an investment account. 

For example, say you have an emergency and want to use money in your investment account. You would have to sell your investments (which may have gone down in value) and wait for an investment adviser to transfer the funds to your bank account before you can use them. That’s why it’s a good idea to have at least three to six months of savings before you open an investment account. 

Once you’ve saved for at least three to six months of expenses, you can consider how investment risks could potentially lead to bigger returns than you’d see in a savings account. Of course, keep in mind that big risk could equal big loss just as easily. It’s all about how you plan your investment strategy. Holding a well-balanced portfolio over a period of time can help you stay on a path to your goals. You can read more about that in this blog about diversification.

When to save or invest

If you need money in the next few years, a high-yield savings account or money market account may be your best bet. A savings account can also come in handy if you haven’t built an emergency fund yet. If you have at least three to six months saved for emergencies and you don’t mind taking some risk, you may want to try investing as you can potentially yield higher returns (or losses) than with a savings account. You could also build your retirement fund with a 401(k) if you’re eligible at your place of employment.

Get started investing with as little as $5

Here at MoneyLion, our main goal is to provide financial access, education, and tools to people who are at different points in their financial journey, whether it’s times of excess or times of need. Half or more of our members are first-time investors based on 2021 surveys, so we’re helping them get started on their path for building for the future with a fully-managed MoneyLion Investment Account.

Not only does it work the same way for someone with $5 to invest as it would for someone with $50,000 to invest, you can automate the way you build your account with Auto Invest, Round Ups, or a combination of the two. It’s our way of helping your money work for you without you having to think about it.