Should I save or invest?

Unsure whether saving or investing would suit your circumstances – or even what the differences are between the two?

Watch the short video to find out more.

Video transcript

Before you decide whether saving or investing is right for you, it’s a good idea to ask yourself a few questions.

Do you have any debts?

If you do owe some money, you might be paying more interest on your debts than you could earn by saving or investing money. So consider paying any debts off first. It’s also worth making sure you’ve thought about other aspects of your finances such living costs, insurance needs, spending money and so on.

Have you got a rainy day fund?

'Rainy days' are a fact of life.

But if you’re really out of luck, you could get a real downpour... maybe redundancy or a temporary loss of income.

That’s why it’s a good idea to keep some money in an easy access account.

How do you feel about risk?

If you can accept some risk to your capital, investing might be for you. But if you don’t want to risk your original investment, you may be better to stick with saving. It’s all down to what you feel comfortable with, whichever way you decide to go.

You also need to think about when you might need your money?

Maybe you’ve got a specific goal in mind that’s quite a few years away.

If so, investing could be for you – provided you’re relaxed about not needing to access your money for a number of years.

You also need to know that the value of your investment is bound to have its ups and downs along the way, and you may get back less than you invested.

But if access to your money is important – or you want to keep the risks down – a savings account may be more appropriate.

One last question…

How much will you need for your retirement?

When you’re preparing for retirement, there’s plenty to think about.

As well as savings or investments, you need to consider a pension if you don’t have one already.

If you’re not sure where to start, see My Retirement Planner – it’s a simple online calculator to help give you an idea what your income might be when you retire.

It’ll help you get your thoughts together.

Saving: how does it work?

  • Short-term – saving is typically for smaller, shorter-term goals (usually no more than three years) such as going on holiday, buying a car or just to have money on hand for emergencies.
  • Easy access to your cash – usually you put your money in a bank or building society account – or maybe take out a cash ISA. Some savings accounts may have a fixed term, or limit how often you can take money out and may require a notice period
  • Minimal risk – the saving account value will not fall, but real value can fall if inflation is greater than the interest rate
  • Earn interest – you can earn interest by putting money in a savings account.

Investing: how does it work?

  • Long-term – investing can help you reach bigger long term goals (typically five years or more) such as your child’s university education or your retirement.
  • Harder to access – when you invest your money, it’s typically not as easy to get your hands on it quickly as compared to a savings account.
  • Invest directly in shares, or via a fund – in a fund, your money is pooled with that of other investors. In turn, the fund could invest in anything from company shares to government bonds or even property.
  • Always involves risk – values can go down as well as up and you may lose some or all of the money you invest.
  • Potential for a higher return – over the long term there is a chance your money will grow more, but remember you could lose all the money you invest.

Helping you decide

Do you have any debts?

You might be paying more interest on your debt than you could earn by saving or investing money. Consider paying off any debts first.

Save money for emergencies

It’s worth building an emergency fund to cover at least three months' worth of living expenses. You could keep this in an easy access account, in case of an emergency such as redundancy, or to cover unexpected expenses such as car breakdowns.

Access to your money

If you’ve got a specific goal in mind and are comfortable knowing that you won’t be able to access your money for a number of years, then investing could be for you. But if access to your money is important, a savings account may be more appropriate.

Understanding Risk

Some people have more of an appetite for life’s risks than others. You might know where you stand on the subject, but many people haven’t fully explored their attitude to risk. Our steps to understanding risk guide helps you to think about the issues.

Our investment products

Aviva ISA

A stocks and shares ISA that allows you to save in a tax-efficient way. Please note that we don’t currently offer a cash ISA. You can access a broad range of investments through a single account you manage online.

Aviva Pension

Allows you to build up a retirement pension fund in a tax-efficient way. You won’t be able to access the money until you’re 55.

Investment Account

Offers access to a broad range of investments through a single account you manage online. This could be an option for people who have already used up their annual ISA allowance.

Savings products

Aviva doesn’t currently offer savings products. To find options which may be right for you, we’d recommend that you speak to a financial adviser or look at the products offered by banks and building societies.

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