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Is it better to save or invest your money?

When putting money away for the future, you can choose to save it in a savings account, where it will grow with interest rates, or you can invest it in an investment fund, which buys shares in the stock market.

What's the difference between saving and investing?

Stocks and shares (investment) accounts and savings accounts can both be used to put money away for the future.

But they differ in two main ways:

  • how they make money
  • how risky they are (to be clear, when we talk about risk, we mean the risk of ending up with less money than you started with).


Saving accounts grow by earning interest, like current accounts do. They increase with interest rates, so when you see on the news that interest rates have dropped, that's bad news if you're trying to grow your savings through interest.

Risk-wise, they are fairly safe. The amount of money in the account can't go down so there's no risk of you ending up with less money than you put in. However, as prices increase over time, you could find that the same amount of money can buy less when the time comes for you to withdraw it. If your money hasn't grown as much as prices have increased by, you wouldn't be able to buy as much despite your good saving intentions.


"Investing" typically means paying your money into an investment fund along with other investors' money. The investment fund is used to buy various different types of investments: things like shares in companies, property and corporate and government bonds.

Your money increases or decreases as the value of those assets changes. When you want to withdraw your money, you'll "sell" your shares at their current price.

Our stocks and shares accounts (Stocks and Shares ISA and Lifetime ISA) invest in managed funds, which means you don't need to choose exactly where your money is invested. You have a choice of just two funds, one riskier than the other, and our fund managers do the hard work.

The table below shows the key differences between savings accounts and investment (stocks and shares) accounts:

(stocks and shares account)
(savings account)
How do they make money? Your money is invested in funds that buy shares in the stock market. The value increases (or decreases) depending on the value of the shares. Your money grows by a percentage of how much you have saved. The exact percentage depends on interest rates.
Can you lose money? Yes. The amount of money you have in the account can go down. No. However, the "value" of the money can go down, which is when the price of goods you might want to buy increases by more than the amount of interest you make on your money.

Balancing the risks of saving and investing

Investing is generally riskier than putting your money in a savings account, but it also means there's potential for your money to grow more.

For example, as there’s no limit to how much companies can grow, investing in company shares has a higher potential to make you money. But it comes at a risk – companies can shrink as well as grow and you could get back less them you put in, depending on what’s happening with your shares when you choose to sell your investments (ie withdraw your money).

With savings accounts, how much money you make depends on interest rates. You can’t technically lose money, but it's worth considering whether the interest rate will beat inflation. If not, you could be losing money in "real terms", which is when the price of the things you want to buy goes up faster than the amount of interest your savings make.

Stock market fluctuations tend to level-out in the long-term, but generally speaking stocks and shares accounts might not a good idea if you're wanting to keep your money invested for less than five years.

Cash vs stocks and shares video

Our short video weighs up the differences between the two, specifically for customers who are wondering what to do with the money in an account that is coming up to maturity.

Choosing between saving money in cash and investing it in stocks and shares

Ultimately, the right choice for you depends on how much risk you're willing to take with your money and how long you want to save for.

If you're looking to put money aside for a fairly short period of time, then a savings account might be the right option for you. But the longer you save for, the less risk there is with stocks and shares investing.

This is because over time any fluctuations in the stock market tend to level out, like when you zoom out on a graph. If there's a dip in the value of your account, there's a good chance that this will recover later on. It only becomes a problem if the dip comes at the time when you want to withdraw your money.

If you are looking to go down the investment route, we have two products that invest in stocks and shares:

Stocks and Shares ISA

With one, simple annual management charge of 1.1%, our Stocks and Shares ISA could be a good option if you're looking to invest over the long-term.

Lifetime ISA

If you want to save for your first home or for life after 60, our Lifetime ISA could help as you'll gain a 25% boost from the government on top of your savings, as well as any potential stocks and shares returns.

Boy wearing sunglasses holding a wad of cash

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