Saving vs Investing: Where Should Your Money Go?

If you’re in your 20s or 30s and wondering about saving vs investing, and how to make your money work harder, you’re not alone. With the cost of living going up and wages struggling to keep pace, young Aussies are asking the big financial question: should I be saving, investing, or doing both?

Let’s unpack the difference between saving vs investing, look at how each plays out over time, and help you figure out the best move for your goals.

What’s the Real Difference?

Saving means parking your money in a bank account where it’s safe, earns a little interest, and can be accessed whenever you need it.

Investing involves using your money to buy assets like shares, property or managed funds. These can increase in value over time, but they also come with risk. The value can go up and down, and it usually takes longer to access your money.

One gives you peace of mind, the other gives you the chance to build wealth.

When to Save and When to Invest

Think about your timeline.

If you’re planning a holiday next year, saving is the way to go. You don’t want your Bali fund disappearing because the market dipped.

But if you’re planning for something five or ten years down the track, like buying a house or retiring early, investing could give your money the chance to grow more than it would sitting in a savings account.

The general rule? Save for the short term. Invest for the long haul.

How Each Strategy Performs Over Time

Let’s say you put $10,000 into a savings account earning around 4 percent. After ten years, that grows to about $14,800 before tax and inflation.

Now imagine investing that same $10,000 in a diversified portfolio that returns 7 percent annually. Over ten years, you could be looking at roughly $19,700.

The difference gets bigger the longer you leave it. Investing has the potential to outpace inflation and build real wealth. Savings keep your money safe but won’t always grow it fast enough to match rising prices.

Pros and Cons

Here’s a quick breakdown to help you weigh it up:

Saving:

• Low risk

• Easy to access

• Interest rates are stable but usually low

• Best for emergencies, short-term goals or peace of mind

Investing:

• Higher potential returns

• Can beat inflation over time

• Higher risk and value can fluctuate

• Ideal for long-term goals like home ownership or retirement

So, What Should You Do?

The smart move is to do both. Start by building up a buffer of savings — at least a few months’ worth of living costs. This becomes your safety net.

Once that’s sorted, you can start investing the extra money you’re not planning to touch for a while. Even small amounts add up over time.

Tools to Get You Started

You don’t need thousands in the bank to start managing your money. There are plenty of tools made for Aussies who are just starting out:

• Raiz: Rounds up your purchases and invests the spare change. Great for first-timers.

• Spaceship: Lets you invest as little as $1 in themed portfolios. Easy to use and beginner-friendly.

• High-interest savings accounts: Banks like ING, Up and UBank offer competitive interest rates with no account fees.

• Superannuation: You might not think about it much now, but your super is a powerful investment tool for your future.

• CommSec Pocket or Sharesies: These platforms make it easy to start buying shares or ETFs with low minimum deposits.

Habits That Make a Big Difference

Whether you’re saving or investing, good habits go a long way.

• Automate your transfers so money goes straight to savings or investments as soon as you get paid.

• Track your spending with budgeting apps or even just a notes app.

• Review your goals regularly and adjust your approach as your income grows.

• Avoid bad debt that charges high interest, like credit cards or buy-now-pay-later traps.

Final Thoughts

Saving and investing aren’t rivals. They’re tools, and each has its place.

Use savings to build your safety net and fund short-term goals. Use investing to grow your wealth over time. If you get into the habit of doing both, your financial future will be in a much stronger position.

The key is to start, even if it’s with just a little. Your future self will thank you for it!

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.