Savers beware of the blurring line
Dave McLeish
February 26, 2025
The team at Wedge has watched the line between saving and investing products become increasingly blurred in recent years, and we think savers need to be wary of this.
We appreciate, on the face of it, the difference might seem trivial. But it’s not and being clear about which one it is you are doing could save you (pun-intended) from making an expensive mistake.
When starting to put money aside, it’s important to be clear with yourself about what the money is going to be used for. Having a specific use for the money can also help with motivation towards the goal.
But most importantly, it will allow you to set yourself an appropriate timeframe to reach the goal. By doing this, it will make it become pretty clear what the best options are for growing your money.
Remember, saving typically involves putting money aside to achieve short or medium-term financial goals – like next year’s holiday, building an emergency fund, or the family’s Christmas fund. While investing more often involves tucking away money for longer-term purposes – like retirement, your newborn’s university fees or trying to maximise wealth over your lifetime.
Because saving is mostly about reaching a certain dollar amount in the near future, most people will want to a place to grow their money where there is very little chance it won’t be there when they need it. Even if this means accepting a lower rate of interest on their money while they save.
The same is true for those who are risk averse or cautious with their money. Regardless of the timeframe these people have set themselves to reach their goal, they will likely want to keep it in a safe place.
Most people who are saving won’t use investment products, like managed funds, to reach their goals. We think this is a wise decision because they don’t behave the way most savers want.
By this I mean, traditional managed funds charge their investors fixed fees while delivering them variable returns. When savers really need fixed returns and variable, or preferably no, fees.
Don’t let the blurring of the line between saving and investing products catch you out.
Welcome to Wedge. And welcome to reaching your savings goals faster.
