Investing and saving are two strategies you can employ when managing your money. You’ll likely incorporate a combination of the two in your plans, based on your goals, timelines and risk tolerance. And while investing does involve more risk potential than savings and past performance doesn't indicate future results, historical S&P data shows investing in the market has a higher return than just saving.
When planning out your finances, it may be helpful to visualize the returns you might see based on different rates — whether that’s for your savings account or what you expect for your investment portfolio.
Read more: Which investment account is right for you?
Use this tool to calculate with different rates of return while keeping in mind the potential risk and variance that’s inherent when investing – investment values rise and fall and are not insured by the Federal Deposit Insurance Corporation.
Savings vs. investing calculator
When to save, when to invest
Your objective, your timeline and your risk appetite all go into your decisions about how you pursue your goals. But here are two broad guidelines to consider:
The shorter your time horizon, the more accessible you may want your money and the lower the risk you’ll likely want to take. For instance, if your car is older and you anticipate needing cash for repairs, you’ll need to be able to access those funds quickly.
On the other hand, a longer time horizon (for instance, retiring in twenty years) may give you more flexibility and, depending on your comfort level, more capacity for risk.
You have many factors to consider when managing your finances, but a great first step is the one you're taking right now — using tools to better understand how different strategies might impact your money.
