Saving vs Investing: What’s the Difference?

Does your income exceed your outgoings?
This is the first step towards financial health. If you’re not able to save money each week or month, then you can’t afford the risk of investing. Investing is absolutely not a get-rich-quick scheme – done properly, it can be a get richer slowly scheme, but it won’t help if you’re struggling to make ends meet.

Do you have an emergency fund to cover at least three months of expenses?
Investing can result in money that outpaces inflation and grows over time, potentially even into a passive income – but to get there, you can’t withdraw willy nilly. You need a proper fund of savings to cover emergencies and other unexpected costs.

Are you free from high interest debt?
Some debt, like a mortgage, is fine – but if you have outstanding credit card bills or a high-interest car loan, then you should funnel extra money into paying this off instead of investing. There’s an extremely low chance of an investment delivering a better return than the interest the loan costs you, so be sure to pay it off first.

Do you have life insurance, income insurance, and other protection policies?
Do you know what your biggest asset is, financially? It’s not your house or your savings but your income – and all the income you will earn in the future. Things like life insurance and income protection are designed to protect this asset and could be a better option than investing for many people.

Do you have a pension that’s putting you on track for retirement?
One investment in Ireland is quite common, and that’s a pension. Your private pension is an investment that you make so that you will have income in retirement, and thanks to the income tax relief on pension contributions it’s one of the better investments in Ireland.
If you do already have a pension, it’s worth your while to weigh up whether any excess money you have would be better used to increase your pension than to make additional investments before you proceed.