You Will Never Get Rich By Just Saving – Do This Instead

I’m here to tell you that you’ll never get rich by just saving money.

It’s a simple fact of life.

Unless you’re a ultra high earner, saving alone won’t make you rich.

However, people tell you every day that you need to save money. They have to be on to something.

How can these people be financially successful if they aren’t saving money?

The answer is simple and requires a small distinction.

That small distinction is what makes the difference from someone just getting by and someone who has promise to accumulate wealth. Would you rather just get by? Or do you want to accumulate wealth?

The key difference is what you do with the money you save.

Just simply saving money, whether you put it under a mattress, bury it in a can in your backyard or put it in a saving account earning a measly 1% interest, will never allow you to grow meaningful wealth if you start from nothing.

Instead, you must invest your savings. That is the key.

When To Invest

Investing makes many people uncomfortable, so not everyone invests. How can you bypass the uncertainty and lack of comfort with investing?

First, you need to set up a stable base in your emergency fund. You can start investing before your emergency fund is full, but it should be full before you put all of your extra money every month into investments.

This base should give you the comfort you need to take that next step to start building wealth by investing.

After you’ve built up a suitable emergency fund for your family, it’s time to start investing full speed ahead. Putting more money into liquid savings beyond an emergency fund is a wealth destroyer, unless you’re saving for a specific short term goal.

What To Invest

Now that you have your emergency fund, or at least have it started, what money do you invest? Great question!

You need to be investing any and all money you don’t have any other purpose for. If your money just sitting around in a liquid form, such as cash or your savings account, then it isn’t working for you.

It’s that simple! Don’t let fear and uncertainty destroy your future wealth potential. Start investing that idle money today. But what should you invest in?

What To Invest In

What to invest in is the tricky part that most people get stumped on. However, with a little bit of work, and I mean VERY little, you can come up with a strong investing plan for yourself.

The first thing you need to do is determine your risk tolerance. Next, come up with a set of future goals for your money. After that, just invest your money according to your risk tolerance and future goals.

Determining Your Risk Tolerance

Risk tolerance is a fancy way of saying “When will you freak out and sell all of your investments in a downturn?”.

Can you only accept moderate declines before you start screaming at your financial adviser to sell everything? Or do you have a mindset that no matter how low stocks go they’ll eventually recover without a doubt?

Figure out how comfortable you are with risk and that will help you determine what investment options you have available to you.

If your risk tolerance is low, you should invest in safer, less volatile assets and if your risk tolerance is crazy high, consider investing in riskier, more volatile assets.

Generally, risk and reward are correlated with investments so in theory higher risk equates to higher potential returns. Just keep in mind, depending on what your goal is, you may have to invest crazy amounts of money with a low risk tolerance to reach your goals.

Setting Goals

Setting financial goals is key in order to determine how your money needs to work for you.

The two factors that are most important, in terms of investing, is the time until the goal needs to be complete and how important it is that the money is available for the goal on that date.

While you may be able to put off buying a new car for a year or two because it is a want, nothing is going to change the fact that your child will graduate from high school at 18 and college bills will be due shortly after.

The further away the goal is, the more risk you can take with your investments since you’ll have more time to recover from potential losses.

The more flexible your goal timeline is will allow to you to take more risk as well. However, if your time frame is short and you have to have the money, you’ll generally want to stay away from riskier investments.

Invest According To Your Risk Tolerance And Goals

Based on what you’ve learned about your risk tolerance and your goals, pick an investment that matches your constraints.

In general, the less time and less flexible your goal timeline is, the more conservative your investments should be regardless of your risk tolerance.

The longer and more flexible your timeline is, the more risk you can take, as long as it doesn’t exceed the your overall risk tolerance.

All you have to do now is do a little bit of research to find an appropriate investment and start investing your money today.

What’s holding you back from investing your money rather than just saving it?

Please keep in mind, I am not an investing professional and the above is not advice for any specific individual situation. Please consult with an appropriate investment adviser before making any investing decisions to assess your personal investment plan.

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. Saving is just the first step toward accumulating wealth. As you said, an emergency fund is necessary. You need to save for that. Then if you are going to invest in mutual funds there is usually a minimum amount you need to open the account so you need to save that up. Or if you are going into rental real estate, you need to save up a down payment plus reserve amounts for maintenance. So it begins with savings but to just collect money in a saving account won’t do it.

  2. Lance @ Healthy Wealthy Income says:

    If we can somehow realize that it’s a bigger risk to not invest than to just stay in a bank account earning .01% then you are on the way. Not sure why we feel more comfortable earning nothing and losing to inflation. Take the plunge to invest or you are taking a bigger risk by doing nothing!

  3. Deb @ Saving the Crumbs says:

    Good points! My parents are super savers. My mom will wait to charge her phone in the car cigarette lighter while driving instead of using the electricity in the house. It’s great to live a frugal lifestyle, but things like that all added up won’t hold a dime to the impact investing can have on your finances.

  4. I started investing right after the economic downturn in 2008 which wound up working out quite well for me. I know there will inevitably be future dips, but I’m in it for the long haul anyway.

  5. nicely stated, Lance.

    you do need to do more than saving if you are ever going to move the needle. in addition to investing, i would add that you should always be looking for opportunities to add to your income!

  6. All great savings advice. I was lucky enough to get some sound financial advice in my 20s which included investing in a mutual fund. I can’t imagine working and earning for so many years and merely getting bank interest. The risk, if you are able to invest, is worth it to earn real interest and make your money work for you.

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