Saving or investing... what's the difference, and which is best for me?

Most people are familiar with the idea of saving... even if they haven't managed to do as much of it as they may have wanted to! We all know what it's like to save up for a holiday or a major purchase - and most of us try to have some cash on standby in case anything unexpected happens.

Investing is a different matter. If you are considering investment – perhaps as an alternative to a deposit account for some of your money – it's useful to look at the differences between saving and investing.

Saving... how does it work?

Investing... how does it work?

Before you decide what's right for you...

Investing wouldn’t be the right option for someone who wanted the certainty of knowing what the returns on their outlay would be. Some people consider investing because they want the chance to earn more than they would from a bank or building society account – but they have to be prepared to take some risks. One option is to choose a mixture of savings and investments – it’s not an ‘either or’ choice.

Start by asking yourself a few questions...

Do you have any debts?

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

What might happen if...

It might be a good idea to keep some money in an easy access account in case of 'rainy days' such as redundancy or a temporary loss of income. And don't forget there will be 'drizzly days' too... things like car breakdowns and boiler failures can happen to anyone!

When will you need 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.

How much income will you need in retirement?

Providing money for retirement may well be your first priority in considering saving or investing. There's a lot to think about here – such as managing any pension plans you may have, and how you could eventually take money from them to provide an income.

  • Our My retirement planner is a good place to start – it can help you get an idea what kind of income you might have when you retire.

Have you thought about inflation?

Bear in mind that inflation will reduce what you can buy with your money, For example, a litre of petrol in 2009 was 87p. By 2014 this had risen to 130.2p – nearly half as much again. The growth your savings or investment might achieve over time may look quite impressive, but possibly less so when you consider how prices could rise over the same period of time.

Inflation

Let’s assume that inflation is 1.5% a year. If it stayed at that rate for ten years, prices would increase by 16.05%. So it would cost £116.05 to buy goods that had cost just £100 ten years earlier.

£100

Now

£116.05

in 10 years time

Saving

Now let's assume that there is £100 in a savings account which earns 0.77% interest a year. In ten years time it would equate to a total of £107.95 (before tax). Although the money would be relativealy secure, the savings wouldn't have grown in line with inflation.

£100

Now

£107.95

in 10 years time

Investing

If the money was invested and it returned 6.9% a year, this would mean that in 10 years time it could be worth £194.81. The investment would have grown more than inflation – but there was no guarantee of this. Investment returns can go down as well as up and the value could have fallen below the amount invested.

£100

Now

£194.81

in 10 years time

How do you feel about risk?

This is one of the most important considerations when you’re deciding whether investing is right for you. Some people have more of an appetite for life's risks than others. You might already know exactly where you stand on this subject – but many people haven't fully explored their attitude to risk.

We can help...

Saving for your future

Some types of investments we offer

If you are planning for your future you’re probably looking for investment products that could grow your money

Aviva ISA

A tax-efficient investment plan which you can buy direct from us or through a financial adviser. Because of the tax advantages it offers, the government limits how much you can save in an ISA. You'll find more information on the Aviva ISA.

Aviva Investment Account

Your money is pooled with other investors to aim for growth, income, or both. You'll find information on the Investment Account we offer.

Aviva Pension

This helps you invest money for your retirement. You normally won't be able to access the money until you are 55. You can start a pension plan through your employer or a financial adviser. You'll find more information on starting a pension here.

Approaching retirement

If you are approaching retirement you're probably looking for investment options that could provide an income

Annuities

An annuity is a financial product designed to turn your pension fund into an income. There are different types and options open to you. Find out about this in our annuities section.

Income drawdown

Also known as 'pension fund withdrawals', this allows you to take an income from the money you've built up in your pension fund whilst leaving the remainder invested for potential future growth.

Income drawdown from Aviva may be suitable for you if you're aged 55 or over and you have a minimum of £30,000 in your pension fund(s).

Find out more about Income drawdown

Equity Release

You could be living in your most valuable asset. There are a number of things you could do to get money from your home, including downsizing or renting out space. Of course, not everybody would want to do this – but if you own your home, there may be an alternative: equity release. This option could give you the opportunity to release some of the value locked in your home without having to move. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Find out more about Equity Release

Already retired

If you are retired or part retired you may be looking for some form of income options

Income drawdown

Also known as 'pension fund withdrawals', this allows you to take an income from the money you've built up in your pension fund whilst leaving the remainder invested for potential future growth.

Income drawdown from Aviva may be suitable for you if you're aged 55 or over and you have a minimum of £30,000 in your pension fund(s).

Find out more about Income drawdown

Equity Release

You could be living in your most valuable asset. There are a number of things you could do to get money from your home, including downsizing or renting out space. Of course, not everybody would want to do this – but if you own your home, there may be an alternative: equity release. This option could give you the opportunity to release some of the value locked in your home without having to move. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Find out more about Equity Release

Call us now for more information

If you’re new to Aviva

Call us on 0800 285 1088 for more information

Lines are open Monday to Friday, 8.00am-6:30pm. Saturday, 9.00am-12noon.

Calls are free from UK landlines but you may be charged for calls made on mobile phones. For our joint protection, telephone calls may be recorded and/or monitored.

Find out how we can help you when you call our team.

If you need some help or information from Aviva, please call our team on the number below. We can help you with:

  • Using our website
  • All the facts about Aviva products and services
  • More details on the options you can choose from when you’re making decisions about your retirement
  • Information on where to find financial advice
    • Although we can’t give you advice, we can put you in touch with an adviser who can talk to you about which financial products or investments may be right for you.
    • Alternatively, you can visit www.unbiased.co.uk to find an adviser in your area.

If we can help you in any of these ways

call us on 0800 285 1088.

Monday to Friday, 8.00am-6.30pm, Saturday 9.00am-12noon

Calls are free from UK landlines but you may be charged for calls made on mobile phones.

For our joint protection, telephone calls may be recorded and/or monitored.

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