If you’re not sure whether it’s time for you to start investing, or if you should focus on saving, the answer depends on your goals, risk tolerance, and financial situation.
The difference between saving and investing
- Saving — putting money aside gradually, typically into a bank account. People generally save for a particular goal, like paying for a car, a deposit on a house, or any emergencies that might come up up. Saving can also mean putting your money into products such as a bank time account (CD).
- Investing — using some of your money with the aim of making it grow, by buying assets that might increase in value, such as stocks, property or shares in a mutual fund.
Should you invest now, or wait?
You may want to consider starting your investment strategy after you’ve:
- Built your emergency savings. Savings should come first. Before investing, try to make sure you have a separate account you can use to cover expenses during an unforeseen event — typically at least 3 to 6 months’ worth of living expenses.
- Paid off high-interest debt. By paying off high-interest debt in full, you’ll reduce the total amount you owe faster, and free up money to put toward savings or investing.
- Maxed out your 401(k) and IRA. If your long-term goals include a comfortable retirement and you’re already contributing the maximum amount to your retirement accounts, it may be an appropriate time to explore additional investment types.
Compare saving vs. investing
Saving
- For the short term. Typically for smaller, shorter-term goals in the near future, like saving for a large purchase or saving for an emergency.
- Ready access to cash. A savings account gives you access to cash when you need it, but many savings accounts limit how often you can take money out.
- Involves minimal risk. Your funds are insured by the Federal Deposit Insurance Corporation (FDIC) to at least $250,000.
- Earn interest. You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments.
Compare savings accounts
Investing
- Usually used for long-term goals. Investing can help you reach long-term goals, such as paying for a child’s education or planning for retirement.
- Longer to access invested funds. When you invest your money, it can take a few more days to access your money compared to a savings account.
- Always involves risk. Investing does not guarantee a return, and it is possible to lose some or all of the funds invested.
- Earnings potential. Investments have the potential for higher return than a savings account.
Learn about investment types
Wells Fargo Destination® IRAs are available through Wells Fargo Bank, N.A. Member FDIC.
Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.
Investment and Insurance Products are:
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Not insured by the FDIC or any Federal Government Agency
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Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
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Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Investing and Retirement Professionals are registered representatives of and offer brokerage products and services through Wells Fargo Clearing Services, LLC (WFCS). Discussions with Investing and Retirement Professionals may lead to a referral to affiliates including Wells Fargo Bank, N.A. WFCS and its associates may receive a financial or other benefit for this referral.
WellsTrade® and Intuitive Investor® accounts are offered through WFCS.
Information published by Wells Fargo Bank, N.A., Wells Fargo Advisors, or one of its affiliates as part of this website is published in the United States and is intended only for persons in the United States.
Wells Fargo & Company and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors to determine how this information may impact your own situation.
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