Should You Save or Invest Your Money? 

You want to make responsible choices with your money. You know it's smart to put money aside for a rainy day.

But you also don’t want to lose out on opportunities to grow your money through investing. So, which one should you choose: saving or investing?

Saving versus investing isn’t really an either-or question, but rather a question of your money’s purpose. Both are important financial moves that help you fulfill unique financial goals.

Saving vs. Investing: What's the Difference?

Although some people use the words “saving” and “investing” interchangeably, there are distinct differences. 

• Saving is about setting aside a portion of your income for short-term goals and emergencies.
• Investing is about generating returns over the long run, generally through stocks, bonds, or real estate.

Both saving and investing ensure your financial security, but you need to know when to choose each one. 

	Saving	Investing
Risk level	Typically none	Potentially high
Time horizon	<5 years	5+ years
Rate of return	Low	Potentially higher
Types of products	Savings accounts, CDs, money market accounts	Stocks, mutual funds, ETFs

When Should You Prioritize Saving Over Investing?

Saving is for short-term goals: typically, purchases you’ll make in less than five years. This could be for a down payment on a house, a new car, a trip, or even just your annual holiday gift shopping. 

You'll also want to focus on saving if you don't yet have an emergency fund. This is money that you can dip into in case of job loss, health problems, or another financial emergency.

Your emergency fund should ideally be a cushion of three to six months’ worth of funds to cover your living expenses. 

If you have an unpredictable income (such as if you're a freelancer or seasonal contractor), you may be better off building up a larger cushion of 9 to 12 months’ worth of expenses. 

READ MORE: How Much Should I Put In My Emergency Fund Per Month?

Where to put your savings

While you can put money aside in a traditional savings account, you'll get better interest rates by putting your savings in a high-yield savings account, a money market account, or a certificate of deposit (CD).

For example, while the national average APY for traditional savings accounts is 0.40% (as of September 2025), the SoFi Checking and Savings Account has an APY of up to 4.30%. (Terms apply.)

You don't want to put money for short-term goals in investments because you could risk losing some of your money if the market drops.

READ MORE: How Much Should You Save a Month?

When Should You Prioritize Investing Over Saving?

Investing is often associated with retirement, and while a retirement account is a major part of the goal, you can generally focus on investing any funds you don’t plan on touching for at least five years.

Investing in stocks and bonds comes with greater risk, so you need a longer runway to make up potential losses.

So, if you’re anywhere from five years to several decades from retirement, you can probably afford to put money into investments. Even if the market drops and they lose money in the short term, they should gain value over time.

That said, don't wait too long to start investing! Even if retirement is a long way away, it's important to start as soon as possible, so that your money has time to grow.

How to start investing

If you have an employer-sponsored retirement account, like a 401(k), that's a great place to start — especially if you’re eligible for any level of employer matching. 

Otherwise, you can easily set up your own investment account with an app like Webull, which lets you start investing in fractional shares for as little as $1.

An important note: If you have a lot of high-interest debt like credit card debt, prioritize paying it off before investing. Otherwise, your debt will cost you more in interest than the expected rate of return on investments.

Saving vs. Investing: Pros and Cons

Ask yourself a few questions about your goals when deciding whether to save or invest — both have pros and cons, depending on your financial goals.

Pros and cons of saving 

Pros	Cons
Safe and insured: FDIC-insured bank accounts protect up to $250,000 per depositor.	Low returns: Even HYSAs earn less than you could potentially make by investing long-term.
Quick access: You can withdraw your money from a savings account fairly easily, without having to sell off investments.	Lost purchasing power: The return on investments keeps up better with inflation.
Simplicity: You don’t need a ton of financial expertise — just compare the APYs and benefits of different accounts.

Pros and cons of investing

Pros	Cons
Potentially higher returns: Even with market volatility, you have a better chance of averaging out higher than with savings.	No guaranteed returns: Your money isn’t guaranteed to increase in value. In fact, it can lose value. Investment accounts aren’t covered by FDIC insurance.
Growing wealth for long-term goals: Investing is good for goals like retirement or your child’s higher education.	Less accessible: While some investment accounts are accessible, it doesn’t mean you should access them. Investments are best left untouched for longer periods.
Diversified risk: Despite the higher risks, the vast range of investment options means you can spread out your risk to avoid losing too much in one sector or type of investment.	More hands-on: Investing has a steeper learning curve. Being an expert isn't required, but it’s wise to do some research before diving in.

FAQs

TL;DR: Should I Save or Invest?

Ideally, you want to save and invest. Prioritize saving for an emergency fund first, in case you lose your job, fall sick, or have another emergency. Then, start investing — even if it's only a few dollars.

Your savings should go into a high-yield account, so that you can earn a bit on it. An HYSA like the SoFi Checking and Savings Account is a good option with a higher-than-average APY.

You can start investing through your workplace if your employer offers a 401(k), or you can start investing on your own with an app like Webull that makes it easy to get started with just a few dollars.