--- title: "Should You Save, Invest or Do Both With Your Money? (2024)" description: "This is a comprehensive guide to personal finance. Learn how to get optimal financial growth from this article on whether to save or invest." url: "https://www.mrmoneytv.com/articles/should-you-save-invest-or-do-both-with-your-money-2024/" category: "Investing & Market" author: "Finlit" published: 2023-08-18 updated: 2024-05-24 source: "Mr Money TV" --- # Should You Save, Invest or Do Both With Your Money? (2024) This is a comprehensive guide to personal finance. Learn how to get optimal financial growth from this article on whether to save or invest. ## Key takeaways - The article's core argument: it isn't save versus invest, but doing both. Save for short-term needs and emergencies, invest for long-term growth. - The author's 50/20/10/20 rule tweaks the classic 50/30/20: 50% necessities, 20% lifestyle, 10% savings, and 20% investments. - Keep six months of expenses saved as an emergency buffer (the 6-months rule) so you don't have to liquidate investments in a rush and miss out on compounding growth. - Savings give you liquidity, stability, and insured, fixed returns, but the interest often does not keep pace with inflation, so the real value of your money can shrink over time. - Investing offers higher potential returns and compound growth across stocks, bonds, real estate and mutual funds, but carries the risk of losing some or all and can be less liquid. - EPF works as both: it is primarily a savings tool, but it invests portions of the pooled funds, making Malaysian members indirect investors too. Navigating the realm of personal finance can often feel like charting unknown waters. One of the most fundamental questions many individuals grapple with is: **Should I save, invest, or do both with my money?** In this article, let's explore the advantages and considerations associated with each approach to help you make an informed decision. A Comprehensive Guide: Should You Save, Invest or Do Both With Your Money? ## Saving: The Traditional Safety Net The first lesson we learnt as a kid from our parents has always been to “save your money!” And that notion still rings true today - saving ***is*** an important aspect of personal finance. It provides **liquidity**, **stability** and is the most **predictable** asset you can own. Savings, especially when kept in accessible accounts, can be readily used for **immediate expenses** or **emergencies**. Other than that, funds saved in banks are usually **insured** up to a certain limit, providing **security against loss**. Unlike investments, savings usually provide a **fixed return**, albeit a small one. However, when you’re only saving your money in savings accounts, the interest rates often don't keep pace with **inflation**, which means the **real value of your money might diminish** over time. You are also missing out on opportunity cost as money that’s saved and not invested **misses out on potentially higher returns** from investments. ## Investing: The Path to Potential Growth Most of us start hearing talks about investing when we’re in college or when we start working. We’ll hear things like “make your money work for you” and although it’s cliche, it is possible to make your money work for you - and you should! By investing, you’re reaping in potential **higher returns**, taking advantage of [**compound growth**](https://www.mrmoneytv.com/post/the-power-of-compounding-a-double-edged-sword) as well as **spreading your wealth** across various assets other than cash. Investments, when chosen wisely, can offer **returns significantly higher than traditional savings** accounts. Then with your earnings, it can be reinvested, leading to compound growth and potentially **accelerating wealth** creation. Investing is also not as scary as it seems as there are diverse options to choose from including stocks and bonds to real estate and mutual funds. All you have to do is **research** and find an investment option that **suits your risk appetite**. With that being said, it’ll be ignorant to say that investing is easy. It comes with **risks** and the possibility of losing some or all of your invested amount. Investing also requires a certain level of **knowledge**, and while resources are abundant, it can still be daunting for beginners. Last but not least, some investments **may not be as easily liquidated** as savings, which can be a concern if funds are needed on short notice. ## A Balanced Approach: Save, Invest Or Both? For many people, a combination of saving and investing proves the most beneficial. I’m sure you’ve heard of the "**50/30/20 rule**" – allocate 50% of income to necessities, 30% to lifestyle choices, and 20% to savings. I want to challenge this rule and tweak it to include investments. I call it the “**50/20/10/20 rule**” - 50% necessities, 20% lifestyle, 10% savings, and 20% investments. Here's why I think every Malaysian should use the 50/20/10/20 rule and take a balanced approach to saving and investing: 1\. Immediate Safety Net A savings buffer can provide peace of mind without touching investments. For instance, the "**6-months rule**," suggests saving an amount equivalent to six months of expenses for emergencies. This can ensure you don't have to liquidate investments in a rush and miss out on compounding growth. 2\. Long-Term Growth Investing a portion of your money can ensure that you’re **not only preserving but also growing your wealth**. Fortunately in Malaysia, we have EPF. While it's primarily a savings tool, EPF invests portions of the pooled funds, making members like you and me indirect investors as well. 3\. Flexibility A balanced approach offers flexibility. You can **adjust the ratio of savings to investments** based on life stages, goals, and financial needs. For example, a fresh graduate might focus more on saving, but as one climbs the career ladder, the balance can shift towards investments. ## Conclusion Whether to save, invest, or adopt a balanced approach depends on individual circumstances, financial goals, risk tolerance, and time horizons. For many, a mix of saving for short-term needs and investing for long-term growth is a strategy that offers both security and the potential for increased wealth. What we need to understand is that it isn't a matter of choosing one over the other but rather understanding their individual and complementary strengths. By harmonizing traditional wisdom with modern financial strategies, Malaysians can pave the way to holistic financial health. And as always, continuous learning is your best ally on the journey to financial well-being. *Subscribe to our* [***financial newsletter***](https://www.mrmoneytv.com/) *for the latest news, insights, and advice on personal finance, investing, and more. With every email, you’ll gather the confidence and knowledge to make informed decisions to achieve your financial goals.* ## Frequently asked questions ### Should I save or invest my money? Both. The article argues it isn't a matter of choosing one over the other, but understanding their complementary strengths. Save for short-term needs and emergencies, where you want liquidity and stability, and invest for long-term growth, where you want higher potential returns and compound growth. For most people, mixing the two offers both security and the potential for increased wealth. ### How should I split my income between saving and investing? The author suggests a 50/20/10/20 split, a tweak of the classic 50/30/20 budgeting rule adjusted to include investing. You put 50% of income toward necessities, 20% toward lifestyle, 10% toward savings, and 20% toward investments. The original rule sets aside 20% for savings with no investing slice, but the author argues every Malaysian should carve out that 20% for investing. ### How much should I save for emergencies? The article points to the 6-months rule: save an amount equal to six months of your expenses. This buffer gives you peace of mind without touching your investments, so you don't have to liquidate them in a rush and miss out on compounding growth when an emergency hits. ### Is EPF savings or investment? Both, in a sense. The article says EPF is primarily a savings tool, but it invests portions of the pooled funds, which makes members like you an indirect investor as well. So while your EPF contributions sit as savings, the fund itself puts that money to work in investments on your behalf. ### What are the risks of investing? Investing carries the risk of losing some or all of your invested amount. The article also notes it requires a certain level of knowledge, which can be daunting for beginners even with resources being abundant. On top of that, some investments may not be as easily liquidated as savings, which is a concern if you need funds on short notice.