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Saving vs. Investing: How to Make Them Work for You

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Saving vs. Investing: How to Make Them Work for You

Has anyone ever told you to save for a rainy day? Or to invest in your future? Saving and investing come up often when talking about financial planning. While both are important to reach financial goals, there are key distinctions between them.

man holding papers and woman writing in notebook while sitting on couch in front of laptop

Saving is setting money aside in a less risky and accessible place — like a savings account1 — that you can use whenever needed. There is less risk involved with a savings account. Yet, other than any interest you may earn, there are limited growth opportunities. You only get out what you put in — plus any interest you may have earned.

With investing, however, there is more potential for gain — hence the appeal for many people who share a goal of financial growth.

Investment accounts2 come in many forms — stocks, bonds, funds and cash — but differ from savings accounts. That’s because the value of the assets in an investment account can, and likely will, fluctuate over time. Yes, investing carries with it the risk of loss, but it also can offer the possibility of greater reward for your efforts and patience over time.

Let’s look at what you might want to consider when determining whether you should save or invest — and why you might want to include both strategies in your financial plan.

Why save money?

Saving can help with short-term goals, like a dream vacation or a new car. Having money in savings can also provide a financial cushion to help sustain you financially during unexpected events. When something happens — a car needs repair, the water heater dies, there’s a sudden job loss or unexpected medical bill — an emergency fund3 or personal cash reserve can prove critical. To keep these emergency funds accessible, a simple savings account may be all you need to put together a cash reserve.

»Tip: A healthy cash reserve that covers six months of expenses can be helpful, but a cash reserve capable of covering expenses for 1-3 years may be even better.

Three sophisticated ways to save money

Establishing long-term financial stability with a cash reserve is something most people tackle gradually, over time. By implementing a systematic savings plan4 — the process of setting aside a specific amount from your paycheck either weekly, monthly or bimonthly — you can pay yourself first rather than waiting to see what’s left at the end of the month.

Another tool that may help you create a systematic savings plan is a payroll savings plan.5 If offered by your employer, a payroll savings plan allows a portion of your paycheck to be automatically deposited into an account of your choice, sending a designated amount to savings each time you are paid.

A third option to systematically save is to set up a recurring transfer from your checking account to your savings account, allowing you to “set and forget” as you automatically grow your savings each month.

Why invest your money?

As noted earlier, investing carries a risk of loss, but it also offers the possibility of increased wealth — especially when you commit to growing your money over a longer period. Many people become investors in order to meet specific, big-ticket long-term goals like higher education or retirement. You might even consider having separate investment solutions and strategies for each long-term goal.

For example, putting money into a 529 plan when your children are young may increase the amount of money you later have to spend on their college tuition over time. The potential for gain in this scenario — and, similarly, for retirement savings — is a primary reason why many people turn to a financial advisor, if only to explore their options.

»Tip: The amount of money that one “should” invest versus save depends on your goals and personal circumstances such as age, income and risk tolerance. Keep those factors in mind and discuss them with your financial advisor.

Before we move further away from discussing savings — and start exploring investment strategies more thoroughly, let's recap the differences between the two approaches.

Saving vs. Investing: At A Glance


  • Short-term goals
  • Funds more available
  • Risk tends to be lower
  • Potential yield is generally lower


  • Long-term goals
  • Funds may be inaccessible for long periods of time
  • Risk can be low or substantial
  • Yield may be fiscally higher

Common ways to invest

For many people, investment products such as IRAs and 529 education plans hold the greatest appeal. Again, those solutions help address specific goals, such as retirement and education planning.

But what if you're interested in a more robust strategy and are willing to take a bit more risk with your money? Managed accounts and passive income strategies could be possible solutions.

Passive income strategies6 typically require minimal work from investors to generate potentially higher returns.

Examples include:

1. Cash equivalents and deposits

Short-term investments whose yield is typically tied to the current interest rate, cash equivalents and deposits may allow you to earn a return on your money while also allowing you to readily access funds, making them beneficial as cash reserve accounts.

2. Bonds

With bonds,7 you are in essence loaning money to a company, municipality, the government or government agency at a specified rate of interest over the life of the bond. The principal — with interest — is repaid to you when the bond reaches maturity.

3. Dividend stocks

Some companies return a portion of profits to shareholders through quarterly payments called dividends.8 A company can pay a dividend in the form of cash, stock, property or other forms. Cash dividends are when a company makes dividend payments in the form of cash.

4. Real estate investment trusts (REITs)

A REIT9 allows you to invest in large-scale, income-producing real estate — and earn a share of the income produced by commercial properties such as shopping malls, apartments, hotels, office buildings, warehouses and more. You may gain income produced through these properties without having to buy or manage the property.

5. Rental property

Purchasing properties and renting them out has the potential to generate significant income, though this can require more work, expense and initial investment than some other passive income strategies.

The takeaway

Having a personal cash reserve is critical to long-term fiscal stability. The money you set aside in your savings account will be available to you when you need it. But if you're interested in creating a more robust financial plan — one with the potential to help increase your wealth — then it might be time to meet with a professional to explore other investment strategies and solutions.

Ready to take that next step in your financial planning? RBFCU Investments Group and our team of financial advisors can help you find the right investments that fit your risk tolerance, timeline and your financial goals.

This article was last updated in February 2024.

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services has a partnership with this financial institution to provide financial planning services and solutions to clients. The financial institution is not an investment client of Ameriprise but has a revenue sharing relationship with us that creates a conflict of interest. Details on how we work together can be found on

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned. The information is not intended to be used as the primary basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor. Please seek the advice of a financial advisor regarding your particular financial situation.

Ameriprise Financial is not affiliated with the financial institution.

Ameriprise Financial cannot guarantee future financial results.

Clients contributing to a 529 Plan offered by a state in which they are not a resident, should consider, before investing, whether their, or their designated beneficiary(s) home state offers any state tax or other state benefits such as financial aid, scholarship funds or protection from creditors that are only available for investments in such state’s qualified tuition program.

There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities.

Like real estate, REITs are subject to illiquidity, valuation and financing complexities, taxes, default, bankruptcy and other economic, political or regulatory occurrences.

Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.

Dividend payments are not guaranteed and the amount, if any, can vary over time.

RBFCU Investments Group is a financial advisory practice of Ameriprise Financial Services, LLC.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.


The following sources were accessed in February 2024.

1“Credit Union Deposits Are Safe, Secure and Insured.”,

2“Investment Accounts.”,

3“An Essential Guide to Building an Emergency Fund.” Consumer Financial Protection Bureau,

4,5“How to Create a Systematic Savings Plan.”,

6“Passive Income: 5 Strategies for Investors to Understand.”, Ameriprise Financial, 21 June 2023,



9"Real Estate Investment Trusts (REITs).",