Depending on whom you speak to, the words ‘save’ and ‘invest’ could be used to describe the same thing. Also, context matters: a corporate executive may consider putting away R10,000 as saving, while that would be a significant investment for someone in a more modest position. So, what’s the difference, and how important is it? The answer is simple: it doesn’t matter all that much. What’s important is to find the right tools so you can reach your financial goals.

Why save or invest?

Although financial goals will differ from person to person, the common thread is that you’re putting aside money today to use later. It’s no wonder that this is often called ‘squirrelling money away’ because that’s exactly what squirrels do: they gather nuts in summer so they can survive through winter. In theory this is easy to understand. But being disciplined enough to save for your future is another story altogether.

But you can overcome your hesitancy by changing your mindset. Rather than making excuses for why you can’t save a few hundred rands a month, it helps to think about what that money will buy you in the future. Your future goal might be retirement, or paying for your kids’ education. Whatever you call it, it’s certainly an investment in your future well-being.

What are the differences?

Here are some of the most obvious differences between the traditional way of classifying savings and investments.

1. How much risk?

A savings account typically guarantees that the money you deposit is safe and that you’ll never get back less than you put in. But this guarantee doesn’t exist for all investment types. Depending on how you choose to invest your money, investments are rated as low-, moderate- or high-risk, with low-risk investments typically attracting lower interest.

2. What about returns?

In a savings account, your money grows at a set rate per year. You’ll know beforehand what that rate is, and whether it fluctuates over time. Interest rates differ according to the type of savings product you choose, with higher rates offered on accounts that are less flexible – like fixed and term deposits.

Few investments offer this level of certainty. Markets may climb strongly or fall rapidly, meaning you don’t know for sure how much money you’ll end up with. In theory, higher-risk investments should deliver a higher return, although you could also lose some of your money. Time is of the essence: The longer you invest your money, the lower your overall risk will be, while savings accounts are better for short-term goals.

3. What’s your time horizon?

Another factor to differentiate between saving and investing is time  – in other words,  how long will it take before you have access to your money, and for how long are you going to contribute? Savings accounts are normally for short-to-medium-term goals of 1 to 5 years. Investments, on the other hand, are for long-term goals that could be 10, 20 or 30 years into the future. This does not mean you can’t also have a savings account for that long or that you can’t do both. You’ll want to keep, for instance, a rainy-day or emergency fund in an account that you can access quickly even though you earn less interest, no matter how long you need to keep it. But if the purpose of an account is to grow your money as much as possible, you should be looking at investment accounts that are not easily accessible and require that you give notice before you can withdraw money from it, or longer-term investments offering better returns.

4. Range and available options

Savings accounts are fairly simple. Generally, you’re offered a set interest rate that may increase as your balance grows. But apart from that, accounts differ only in the restrictions on access to your money. Some accounts allow you immediate access, others only after having waited a set number of days, and fixed-deposit accounts lock your money in until a set date. You’ll find a far wider array of investment types and investment targets than savings accounts, each with different rules about when you can access your money.

5. Difference in costs

Due to their simple nature, savings accounts are low-cost ways to save money because you don’t have to pay high monthly fees. Some investments, on the other hand, can cost you more.  Unit trusts and other pooled investment funds like exchange traded funds are the most affordable, while actively managed funds and personal portfolios can attract higher management fees. Higher fees are usually offset by the better-than-average returns that these professional funds promise.

6. What about accessibility?

Even though online share trading and other platforms allow eligible clients to trade stocks and other investments, they are still less accessible than simple savings accounts. You can easily open and link a new savings account using the Nedbank Money app or Online Banking, or by visiting your nearest branch. Certain types of investments like unit trusts – also available on the Money app or Online Banking – have a similar level of convenience, although more sophisticated investment funds will require more effort to set up initially.

Like many of life’s disciplines, it takes a conscious effort to change your behaviour and mindset. Making sure your future self is financially secure is probably one of the most difficult to grasp. But when you understand that you can change the future that you’ll live, whether you call it saving or investing makes no difference.