Saving vs. investing: what are the differences?

Investing and saving are two terms often used interchangeably, but in reality, they refer to different financial strategies. Both involve putting money aside for future use, but the way they work and their objectives vary significantly. In Singapore, where economic stability and growth have always been a priority, understanding the difference between saving and investing is crucial. This article aims to provide an in-depth analysis of the differences between saving and investing in Singapore, highlighting why it is essential to distinguish between them.


Saving and investing are two fundamental ways to manage your finances in Singapore. Both approaches aim to secure your financial future but have different purposes. Saving involves putting money aside for short-term goals or emergency funds while investing focuses on long-term financial growth.

The purpose of saving is to accumulate enough funds to meet immediate needs or unforeseen expenses, such as medical emergencies, job loss, or home repairs. Savings typically involve keeping money in a bank account or liquid assets that can be easily accessed. In contrast, investing aims to generate wealth over an extended period by putting your money into various financial instruments such as stocks, bonds, real estate, and mutual funds.

Saving is ideal for individuals with short-term financial goals, such as buying a car or saving for a vacation. It is also an excellent option for those needing to access the money quickly in an emergency. On the other hand, investing suits those with long-term financial objectives, such as retirement planning or buying a house. While savings help meet short-term needs, investing creates wealth and provides financial security in the long run.

Risks Involved

Another essential difference between saving and investing is the level of risk involved. Savings are considered safer as they involve keeping money in low-risk accounts such as savings, fixed deposits, or government bonds. These investments offer minimal returns but have little to no risk of losing money.

In contrast, investing carries a higher level of risk as it involves putting money into assets subject to market volatility and fluctuations. Stocks, for example, can generate significant returns but also carry a high risk of losing value. Real estate investments may provide excellent returns over time, but economic and current factors can also impact them.


The primary goal of investing is to generate income and grow wealth over time by putting your money into various assets. Investments such as stocks, mutual funds, and real estate provide higher returns than traditional savings accounts. However, these returns are not guaranteed and can fluctuate significantly depending on market conditions.

In contrast, the return on saving is relatively low but more stable. Savings accounts usually offer minimal interest rates that barely keep up with inflation. However, savings provide a secure way to preserve your money and are ideal for short-term financial goals or emergency funds.


Liquidity is the ease of converting an asset into cash without significant losses. Savings accounts offer high liquidity, allowing account holders to withdraw their funds without penalties and with minimal delays. In contrast, investments such as stocks, bonds, and real estate may require time to sell and convert into cash, making them less liquid.

Liquidity is a crucial factor to consider when deciding between saving and investing. If you need quick access to your funds, savings are the better option. However, investing in assets with lower liquidity can provide higher returns if you have a long-term financial goal.

Even the best savings plan in Singapore cannot match the potential returns of a well-planned investment portfolio. However, investing in high-risk assets with low liquidity can be detrimental if you need emergency funds.


Taxation is another crucial consideration for saving and investing in Singapore. Savings accounts are subject to income tax, with interest earned being considered as part of your taxable income. In contrast, investments may have different tax implications depending on the type of asset and the duration held.

Singapore offers various investment options that come with different tax benefits. For example, the Central Provident Fund (CPF) offers attractive interest rates and tax reliefs for retirement savings. At the same time, the Supplementary Retirement Scheme (SRS) provides tax benefits when investing in stocks and other investment instruments.


The duration of the investment is another significant difference between saving and investing. Saving typically involves short-term goals, with funds often needed in a year or less. On the other hand, investing focuses on long-term objectives and may require holding an asset for several years to reap its benefits fully.

For example, buying stocks involves a long-term commitment as the market may experience significant short-term fluctuations. In contrast, saving for a vacation or emergency fund requires minimal time to reach the goal.

However, investment options, such as day trading or micro-investing, provide relatively quick returns. These options come with higher risks but can generate potential returns within shorter timeframes.