Investment Account or Savings Account – What option is best for me?

Investment account or savings account? This is a great question and one I enjoy answering since I began my financial career in banking. It is important for everyone to have accounts with your local financial institution; however, over my 15 years at the bank, I started to understand that it was equally important for individuals to also have access to investment accounts in order to achieve their financial goals. In fact, I felt so strongly about educating individuals and helping them meet their financial goals, I left my career in banking and became a Wealth Advisor.

Many of my clients know my banking background so they often ask: What is the difference between an investment account and savings account and what type of account is best of me? I would argue that both types of accounts are important and would like to detail the differences below!


Investment Account Savings Account
Goals These types of accounts are typically used for long-term goals, (3+ year timeframe, retirement, saving for children’s education, etc.). My #1 goal for all my clients is to have three to six months of living expenses set aside in a savings account. This account is there to protect you and your family in case of an emergency. Savings accounts are also best suited for short-term goals (1-3 year timeframe, down payment on home or vehicle, etc.).
Safety Your funds can be invested in stocks, bonds, or cash. There is more risk if the funds are invested in stocks or bonds since the market will determine the current value of your account. Your funds are held in cash. If you deposit a $1 you are guaranteed that you can come back the next day and withdraw a $1.
Access Your stock and bond holdings will need to be sold before the cash is available for withdrawal. You cannot walk into your advisor’s office and receive cash immediately. You can go to your financial institution and have immediate access to the funds.
Earnings You are paid interest, dividends, and when the markets are doing well, you also have the potential for market growth. You are paid interest. Interest rates are often similar to the Federal Funds Rate which is currently set to a range of 0% to 0.25%.


As you were reading through the chart, I hope you were thinking about your unique financial situation and how a savings account, investment account, or both can help you meet your financial goals. You are maybe just starting out and need to build up your emergency fund or maybe you have your emergency fund built and are ready to start an investment account to pursue one of your long-term goals. Either way, if you are unsure or need more information, please don’t ever hesitate to give us a call. We would love to visit and provide recommendations based on your unique situation.


Michelle Herickhoff, CFP®
Wealth Advisor
MAG Wealth Management



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