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Savings and investments

piggy bank with coins

Welcome to our PERSONAL FINANCIAL PLANNING SERIES. Today I want to chat to you about building up your SAVINGS and your INVESTMENTS.

“The wise man saves for the future but the foolish man spends whatever he gets.” (Proverbs 21:20)

What is the Difference Between Saving and Investing?

Many new investors don’t understand that saving money and investing money are not the same thing. In fact, savings and investing play different roles in your financial strategy. It is therefore vital that you understand the difference as you begin your journey to building wealth.

What is SAVING?

Saving money is the process of putting cash aside and parking it in safe and accessible investment.

Your cash reserves must be liquid and must be available when you need these funds.


Investing money is the process of building up investments that have the ability of generating growth over time. These funds do not have to be instantly accessible and should be invested over the long term.

Investment funds are usually invested in a selection of assets that will include equities, property, bonds and cash, with a potential spread between local and global assets. While funds set aside for investing may fluctuate in value due to market volatility over the short term, these funds should be able to generate real growth over the long-term.

How much should you SAVE and INVEST?

In the past, I have suggested that you consider the 10-20-70 PRINCIPLE, where you…

give your first 10% to God (there is a tremendous blessing in being generous to God and helping out charities and those in need), put 20% into your wealth plan, which is then spread between…

  • 10% going into SAVINGS
  • 10% into INVESTMENTS

Building up your savings is vital to ensure that you have cash flow available to fund emergencies, accidents, and tough times.

However, funds set aside in savings is not a good recipe if you are looking to grow your funds. In fact, while you may generate some interest on your savings, the growth is usually less than inflation, and having all your money in savings will therefore erode in real terms.

It is prudent to build up reserve savings of at least 3 to 6 months income. This way you will always have sufficient cashflow available to cover your personal needs and living expenses in the event of losing your job, or if you went through a financial storm.

  • Reserve Fund: Build up a reserve fund to ensure good cash flow if you choose to change jobs or get retrenched.

It is also important that you have access to emergency savings if you have an accident or have unforeseen expenses, if something needs replacing or somethings breaks down. (eg. washing machine breaks down or your toaster needs replacing)

  • Emergency Fund: When an emergency happens, the money is needed immediately. Funds set aside for your emergency fund should therefore be in an accessible Savings Account or Money Market Fund.

It is also important to set savings aside for specific short-term needs and purposes where you will need a large amount of cash in five years or less. (eg. holiday or children’s education)

  • Short-term savings needs: If you are saving for a short term need like a holiday, a car or a home improvement or repair, or to replace a computer or toaster, you should allocate these funds to savings. If you have a short term need within 5 years, you should consider saving these funds in less risky assets (bank savings or income funds).

You can also ensure that you have healthcare protection, insurance, and life & disability assurance in place to help you reduce your reliance on cash savings.

On the other end, you should not pull funds out of your long-term investments to fund your short-term needs, as this can have a serious impact on your long-term investment goals (eg. retirement or starting your own business or tertiary education).

  • Children’s education: If your child’s tertiary education need is a long way away, the money should be invested, but if the funds will be needed within 5 years, you should consider it savings, and these funds should be invested in less risky assets.
  • Retirement: Retirement is a huge need that is often neglected. You should build up your retirement investments over the long term within an investment portfolio.

Furthermore, if your long term investments are going through a volatile patch, it would be crazy to access these funds which are down in value.

While you should set up your retirement investments early to benefit from compound interest and the tax breaks, you should only start building up your other growth investments, once you have sufficient savings set aside, together with appropriate healthcare cover and insurance in place to ensure financial protection.

In a nutshell

It you want to succeed financially, you need to begin by earning money. You then need to manage your money well. This includes setting up a budget, spending less than you earn, watching debt levels, and ensuring that you save and invest before you spend. It is important to build up your assets, so make sure you set up a savings plan and an investment plan as part of your budget.

To summarize

The key difference between SAVINGS & INVESTMENT is really quite simple:

  • If you are going to need the money in the near future, save it, and ensure your savings are liquid.
  • If you aren’t going to touch the money for a longer time, then invest it within a portfolio that gives you the ability to generate good growth over time.


  • Savings are low risk funds that must be liquid (available) when you need them.
  • The purpose of saving money is so you can have money available for specific short term purposes and emergencies.
  • If you are investing over the short term, I would suggest that you consider a portfolio consisting of cash savings accounts, money markets and income funds. While these funds only yield low returns, the capital will remain accessible and safe.
  • Build up a reserve in savings.

“Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.” (Proverbs 6:6-11)


  • Investments, on the other hand, are for wealth building, and funds that you can set aside to grow over the long-term.
  • Yes, investments do involve greater risk, but investments also yield much greater returns when left to grow over time.
  • If you are investing over the longer term, I would suggest that you consider a growth portfolio consisting of a diversified basket of balanced funds, equity funds and property funds. These asset classes have a long-term history of generating positive inflation beating growth over time.
  • By investing over the long term you can generate explosive growth over time, due to the power of compounding.

“Whoever gathers money little by little makes it grow.” (Proverbs 13:11)


It is vital that you build SAVINGS & INVESTMENTS into your budget.

Many have the excuse that they don’t have the money available. However, if you review your budget, I am sure that you will find that you can cut some unnecessary expenses, and that you can make savings and investment planning a priority.


  • Yes, you need to build up your savings reserves for short term goals, needs and unforeseen emergencies.
  • But, you also need to invest over the long-term and let it grow.

If you are looking to build up a Wealth portfolio, get advice on how best to structure your savings and investments. Why not sit down with a Financial Advisor who can help you set up a savings and investment strategy that is tailored to your needs, affordability and your objectives. By setting savings aside you can ensure that you have funds available for the unexpected short term needs that can arise, and by building up your investment portfolio, you can ensure that you can build towards a fruitful future of financial freedom.

Happy investing. God bless you.

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  1. Good day I want to better my life and finances and I am letting go and letting God take care of my situation 🙏Clinton thank you many blessings to you

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