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“The key difference between saving and investing comes down to purpose, risk, and liquidity.” — John S. Rhodes, Rhodes Brothers
Most people know they should be saving and investing—but few actually know the difference between the two. And here’s the truth: understanding this difference can mean the difference between financial stress and financial freedom.
Whether you’re just starting your financial journey or you’re trying to build long-term generational wealth, knowing when to save and when to invest is essential. You don’t need to be a Wall Street pro or a budgeting wizard to master this. With the right strategies, anyone can build a strong financial foundation—and even grow their money without feeling overwhelmed.
In this blog post, we’ll break down the real difference between saving and investing, clarify when to use each, and provide step-by-step strategies to help you make smarter money moves. We’ll also share expert tips, tools, and common pitfalls to avoid—based on the insights from John S. Rhodes and the Rhodes Brothers YouTube channel.
“When you’re saving, you’re putting money aside to deliberately be spent in the near term. With investing, you’re trying to get your hands on assets that produce cash flow or at least hold their value.” — John S. Rhodes
TL;DR
- Saving is for short-term goals and emergencies—think 6 months or less.
- Investing is for long-term growth—you’re buying assets like stocks or real estate.
- Savings are low risk and liquid; investments have higher risk but offer potential for greater returns.
- Use savings for bills, emergencies, and short-term plans.
- Use investing for wealth growth, retirement, and future goals.
- Know your purpose, risk tolerance, and time horizon before deciding.
- Avoid common mistakes like under-saving or investing money you need soon.
- Use tools like YNAB, Betterment, or Fidelity to manage your strategy.
Saving vs. Investing: A Straightforward Breakdown
What is Saving?
Saving means setting aside money for short-term needs or emergencies. It’s safe, accessible, and low-risk, but it doesn’t grow much over time.
Examples of Saving:
- Emergency fund
- Rent or mortgage for the next 3 months
- Vacation fund
- Down payment for a car
Tools to Use:
- High-Yield Savings Accounts (e.g., Ally Bank, Capital One 360)
- Certificates of Deposit (CDs) for slightly higher returns
- Budgeting apps like YNAB (You Need A Budget) or Mint
Pro Tip: Aim to save 3-6 months of living expenses in your emergency fund.
What is Investing?
Investing means putting money into assets that have the potential to grow over time. It comes with risk, but it also offers higher returns than saving.
Examples of Investments:
- Stocks & ETFs
- Bonds
- Real estate
- Index funds
- Gold or Bitcoin (for more risk-tolerant investors)
Tools to Use:
- Fidelity, Robinhood, or Vanguard for stocks and ETFs
- Fundrise or Roofstock for real estate investing
- Robo-advisors like Betterment or Wealthfront
Quote to Remember:
“Do not save what is left after spending, but spend what is left after saving.” — Warren Buffett
Actionable Steps: How to Know When to Save vs. Invest
Step 1: Define Your Financial Purpose
Ask yourself:
- Do I need this money in the next 6–12 months? → Save
- Am I planning for 5+ years down the road? → Invest
Step 2: Build Your Emergency Fund
Before you invest, ensure you have:
✅ 3–6 months of expenses saved
✅ Funds for short-term obligations (bills, rent, insurance)
✅ Quick access to this money (liquidity)
Step 3: Evaluate Your Risk Tolerance
Use free tools like:
- Vanguard’s Investor Questionnaire
- Morningstar’s Risk Profiler
If you’re uncomfortable seeing your money drop in value—even temporarily—stick with low-risk investments or save more.
Step 4: Start Small with Investing
Once your savings are solid:
- Open a Roth IRA or 401(k) if available
- Use index funds like VTI or SPY for diversification
- Automate monthly contributions—even $50/month adds up
Step 5: Use Smart Tools to Manage Your Money
For saving:
📱 Chime, Ally, or SoFi for high-yield savings
📈 YNAB for budgeting and tracking
For investing:
📊 Betterment for automated investing
📱 Robinhood or Fidelity for DIY investors
📚 Learn from Rhodes Brothers YouTube Channel for free tips
Common Mistakes to Avoid (And How to Fix Them)
Whether you’re new to managing money or well into your financial journey, these common missteps can sabotage your goals. The good news? They’re completely avoidable once you know what to watch out for.
Let’s break them down with real-world context, solutions, and a bit of tough love where needed.
Investing Money You’ll Need Soon
The Mistake:
You just got a bonus or tax refund and want to “put your money to work.” So you invest in stocks or crypto, thinking it’ll grow fast. But what if you need that money next month for rent, a medical bill, or a car repair?
The Problem:
Markets go up—and down. If the market dips when you need your cash, you may be forced to sell at a loss. You’re not investing at that point—you’re gambling with your future.
Real-Life Example:
Julie invested her wedding fund into tech stocks thinking she’d double it in six months. The market dropped, and she had to borrow money for her wedding. Ouch.
The Fix:
Rule of Thumb: If you need the money in 12 months or less, keep it in a high-yield savings account or money market fund—not the stock market.
Use tools like Ally, Marcus by Goldman Sachs, or Capital One 360 for safe, accessible storage.
Not Saving Enough Before Investing
The Mistake:
You’re excited to start investing (which is great), but you haven’t built an emergency fund. One surprise expense, and you’re forced to pull money out of your investments—possibly at a loss.
The Problem:
This breaks the first rule of wealth-building: protect your downside. Without a savings cushion, you’re setting yourself up for financial whiplash.
Real-Life Example:
Tom started investing with $5,000 but had no savings. When his car broke down, he had to sell his index funds at a 10% loss. If he had just $1,000 saved, he could’ve avoided that.
The Fix:
✅ Build a starter emergency fund of at least $1,000–$2,000
✅ Then aim for 3–6 months of expenses
✅ Use automation to consistently move money from checking to savings
✅ Apps like Qapital, Chime, or Simple make this easy and frictionless
Chasing High Returns Without Understanding Risk
The Mistake:
You hear your friend made 200% on Dogecoin or doubled their money on a hot stock. FOMO kicks in, and you throw your savings into something you don’t fully understand.
The Problem:
High returns come with high risk. If you don’t understand the underlying asset, you’re not investing—you’re speculating. And speculation should never be your main strategy.
Real-Life Example:
Mark put $10,000 into a trending crypto coin based on hype. Within a week, it dropped 60%. He sold in a panic and lost $6,000. Had he diversified and studied the asset, the story might be different.
The Fix:
📚 Before you invest in anything, ask:
- What is this asset?
- How volatile is it?
- What’s the long-term outlook?
✅ Stick with diversified index funds like VTSAX or SPY until you’ve built confidence
✅ Allocate no more than 5–10% of your portfolio to speculative bets
✅ Use resources like Investopedia, Morningstar, or the Rhodes Brothers YouTube Channel to learn first
Keeping All Your Money in Low-Interest Savings
The Mistake:
You’re afraid of risk, so you keep all your extra cash in a savings account earning 0.01% interest.
The Problem:
Inflation is the silent killer of your wealth. If inflation is 3–4% and your savings earns 0.01%, you’re losing money in real terms every year—even though your account balance doesn’t change.
Real-Life Example:
Sarah kept $50,000 in her regular bank account for 10 years. With inflation averaging 3%, her purchasing power dropped by over $13,000. That’s a big chunk of value gone.
The Fix:
Balance is key.
- Keep your emergency fund in a high-yield savings account
- Put your long-term money into investments that historically outpace inflation
✅ Use ETFs, Roth IRAs, or 401(k) plans for long-term growth
✅ Consider target-date funds or robo-advisors to simplify your investment strategy
✅ Tools like Betterment or Wealthfront can help you grow without doing all the heavy lifting
Frequently Asked Questions (FAQs)
How do I get started with saving?
Start by setting up a dedicated savings account. Automate transfers from your checking account weekly or monthly.
How much should I save before I start investing?
Ideally, save at least 3–6 months of expenses before you begin investing.
What are the safest places to save money?
Look for FDIC-insured high-yield savings accounts or government-backed CDs.
What are good beginner investments?
Low-cost index funds, ETFs, or target-date retirement funds are great for beginners.
Can I save and invest at the same time?
Yes! Just prioritize savings for short-term goals, and invest what’s left for the long term.
Is investing risky?
Yes—but risks can be managed through diversification, time horizon, and smart choices.
What tools help with saving and investing?
Apps like Betterment, YNAB, Fidelity, or Wealthfront are beginner-friendly and effective.
Should I pay off debt before investing?
Pay off high-interest debt first (like credit cards). Then split your income between saving and investing.
What’s more important—saving or investing?
Both are important! Saving provides security, investing builds wealth. Your goals determine the balance.
How do I learn more about this?
Watch videos from Rhodes Brothers on YouTube for clear, friendly explanations on saving, investing, and more.
Your Financial Future Starts with a Simple Decision
Saving and investing aren’t just financial terms—they’re life strategies. Once you understand their differences, you can take control of your money, reduce stress, and start building your future.
Here’s what to do next:
- Start with short-term savings for emergencies.
- Then begin investing in long-term assets to grow your wealth.
- Use smart tools to automate, track, and adjust your strategy.
And remember what John S. Rhodes said:
“It really comes down to purpose. Why do you need the money, and when?”
Get started today—even with just $10 a week—and build habits that your future self will thank you for.
Thank you for reading! Be sure to check out and subscribe to the Rhodes Brothers YouTube Channel for more tips, strategies, and insights on how to master your money and grow your wealth.
Resource List
Books:
- The Psychology of Money by Morgan Housel
- I Will Teach You to Be Rich by Ramit Sethi
- Your Money or Your Life by Vicki Robin
- Rich Dad Poor Dad by Robert Kiyosaki
- The Simple Path to Wealth by JL Collins
Podcasts:
- BiggerPockets Money Podcast
- The Ramsey Show
- The Mad Fientist
- Afford Anything with Paula Pant
- ChooseFI
Courses:
- Smart Investor Bootcamp by Morningstar
- Ramit Sethi’s Money Coaching Programs
- Investing Classroom by Morningstar (free)
Tools & Apps:
- YNAB (You Need A Budget) – best for budgeting
- Mint – great free budgeting app
- Ally Bank – high-yield savings
- Betterment – robo-investing
- Fidelity – trusted brokerage
- Robinhood – easy investing app
- Vanguard – long-term investing
- Chime – mobile savings
YouTube Channels:
