Savings vs. Investing — Side-by-Side Comparison

How It Works (Quick Math)

We compound monthly. With monthly return r, months n, starting pot P₀, and monthly contribution PMT at month-end:

• Future value (both paths): FV = P₀(1+r)ⁿ + PMT·((1+r)ⁿ−1)/r (if r=0, then FV = P₀ + PMT·n).
• Savings: use r = APY/12.
• Investing: use r = (Return − Fee)/12 (simple monthly approximation).
• Today’s money: divide by (1+i)ʸ where i is annual inflation and y = n/12.
• Uncertainty band (optional): simple Monte Carlo using a geometric Brownian motion with your volatility to show a 10th–90th percentile range. For education only.

Friendly Tips

• Time matters: Investing’s edge typically shows over longer horizons; savings can shine for short-term goals or guaranteed cash needs.
• Fees matter: Even small annual fees compound—try moving the fee slider to see the impact.
• Inflation lens: The “today’s money” view helps keep expectations realistic.
• Risk comfort: If the band looks too wide for your taste, a cash-first approach for near-term goals can be sensible.

Note: This tool is general information—not advice. Consider taxes, account rules, and your risk tolerance.

Comparing Savings and Investing: What’s the Real Difference?

Savings and investing both help money grow, but they serve different jobs. Savings usually means cash in a bank or building society account—easy to access, with a known interest rate and very low risk. Investing typically means owning assets such as shares, bonds, or funds, with returns that can be higher over the long run but that move up and down in the short run. This tool shows both paths side-by-side so you can see when investing might overtake savings (the “breakeven” point) and how inflation affects the outcome in today’s money.

Time Horizon: How Long Until You Need the Money?

Time is the biggest driver. Short horizons (months to a couple of years) often favour cash: the priority is stability and quick access. Longer horizons give investments time to ride out dips and potentially compound at higher rates. Use the time slider to see how the lines spread apart as months turn into years.

Risk and Volatility: Can You Sleep at Night?

Savings balances don’t jump around; investing balances do. Volatility is the day-to-day wobble you might experience in a portfolio. Our optional uncertainty band gives a simple illustration of that wiggle room, so you can see a plausible range rather than a single line. If a wide band feels uncomfortable—especially for near-term goals—leaning on savings can be more appropriate.

Inflation: The Quiet Headwind

Prices tend to rise over time. That means £10,000 today may not buy as much in five years. The “today’s money” view discounts future values for inflation so you can compare outcomes in real terms. Try changing the inflation input to understand how much of your growth is keeping pace with rising costs.

Fees, Taxes, and Account Type Matter

Small annual fees can compound and reduce investment returns. Our investing inputs subtract fees from the expected return to keep comparisons fair. Taxes can also change net outcomes and depend on your country, account type, and personal situation. Consider whether tax-advantaged accounts or allowances apply to you.

Liquidity and Behaviour

Cash is simple and liquid—handy for emergencies and planned expenses. Investments may be just as liquid in practice, but prices can be unfriendly at the exact moment you need to sell. Behaviourally, some people prefer clear, steady progress in cash pots for short-term goals, and use investments for longer-term ambitions.

How to Use This Tool

• Set your starting balance, monthly contribution, and time horizon.
• Enter realistic savings and investing rates (include fees for investing).
• Toggle the uncertainty band to see a range of plausible investment outcomes.
• Compare nominal and “today’s money” results to understand the effect of inflation.

Educational information only—this is not financial advice. Markets, interest rates, and inflation change. Consider your goals, time horizon, risk tolerance, and any fees or taxes that may apply to your accounts.