The Difference Between Saving and Investing

A short overview of the difference between saving and investing, and a look at how it can be fun to save and invest if you have the right mindset

Alanna Petroff 17 September, 2012 | 3:30PM
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It is easy to confuse saving and investing. Many people use them in sentences as if the two terms are synonymous. However, it’s important to know that “saving” and “investing” are related, but different.

At its most basic level, saving is the act of putting money away in a safe place with the intention of using the money in the future. The UK government defines saving as putting money aside without risk, and usually with the chance to earn interest. Savers can put their money in bank accounts, building society savings accounts and cash ISAs, among other places. People save for a variety of different reasons, including retirement, home ownership and travel.

Investing involves committing money into an investment vehicle in the hopes of making a financial gain. Investing is different from saving because it involves a greater level of risk and there is no guarantee that you will get your money back. Investing involves putting your money into investments--such as stocks, bonds, funds, ETFs, investment trusts and property--with the hope that your money will grow, but with the possibility that your money could shrink or disappear. This risk is assumed by investors in the hopes that they will not lose money but instead make money on their investments.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.