What is the difference between saving and investing?

Georges Bock
Table of contents
Georges Bock

What is the difference between saving and investing?

Do you want to put some money aside for later? At the latest when you start thinking about your financial security in retirement, the question comes up: Do I want to save my money or invest it? The two terms are often used interchangeably, but they are different. This is why there are often misunderstandings.

For this reason, it's important that you get to grips with the two concepts early on. Don't worry, you don't have to dig through dictionaries to understand the finer points. At Moniflo, we want to help you understand how the words "saving" and "investing" differ and give you tips on how to decide between the two strategies.  

In a nutshell

  • The terms "save" and "invest" differ in meaning.
  • Saving means setting aside money to give yourself a reserve for emergencies or to fulfill a specific goal.
  • When you invest, you take money in hand and want to build a fortune with it.
  • Save money or invest? The respective strategy is based on your financial goals. These can be short-term, medium-term or long-term.  
  • Even beginners can invest money, for example in sustainable investment funds. With Moniflo, you can find suitable funds based on their impact score.    

Saving money or investing: Which is better for me?  

For beginners in particular, the difference between "saving" and "investing" as a concept is not always entirely comprehensible, and rightly so. Because often these two terms are used synonymously, but they differ from each other.   

What does "save" mean?

Imagine you want to buy a new car. If you regularly put money aside for your desire so you can afford it eventually, that means you're saving for it. Many people also save to have a reserve for emergencies such as a broken washing machine. It is generally recommended to set aside about three months' salary.  

What does "invest" mean?

When you invest, you take a certain amount of money in your hand and try to increase it. To do this, people resort to investment options such as funds, shares or real estate. You decide for yourself how much money you want to invest based on your financial situation. It is a prejudice that only wealthy people can invest money. Even small sums can be profitable if you start early.  

Invest or save: Your financial goal is crucial

It is not a question of type which strategy suits you better. Rather, it is a matter of precisely defining your own financial planning goals and deciding on a path on the basis of this.  

You can distinguish between the following goals:

  • Short-term goals (within the next 5 years)
  • Medium-term goals (within the next 5 to 10 years)
  • Long-term goals (in 10 years at the earliest)   

Saving and investing according to personal goals

For example, if you want to save for a new piece of furniture, you will probably want to use it within the next 5 years. So this is a short-term goal that you can achieve with a cash deposit, for example.  

For medium-term goals, you can save or invest. This also depends somewhat on the amount you want to achieve and your general financial situation.  

If you are thinking about your retirement planning and already want to take care of your standard of living in retirement, this is a long-term goal. With these goals it is better if you invest money, for example in investment funds. If you are now wondering why, we have an explanation for you.  

Sometimes a combination of investing and saving is a good idea. It depends on what goals you are pursuing and what resources you have.

Why you should choose investing for long-term goals  

The market situation plays a significant role in this decision. Many Germans like to save a lot, especially nowadays. The problem, however, is that if you have your savings in a checking account or a call money account, you get no (or only little) interest. Add to that the fees charged for accounts, and you're almost making a killing.  

Of course, some money always stays in the checking account to pay for monthly expenses. However, anything you want to put aside beyond that is not in good hands in the account. The problem with demand deposits is not only the lack of interest, but also the loss of value. As inflation increases, the value of your savings will continue to decline.  

That's why the stock market is the better choice for long-term goals. In the best case, you benefit from a higher return. You can cushion the risk by choosing different types of investments. Experts also speak of the so-called diversification.

Can I as a beginner invest in the stock market?

Sure you can! Do you have a long-term goal in mind and want to invest money for the first time? However, beginners often do not dare to invest money in the stock market. At the same time, many want to make their own decisions about investment products so they know exactly what they are investing in. But what is the best choice? Cryptocurrencies, shares, funds or rather real estate? After all, the many options can seem a bit overwhelming at first.

Find sustainable funds the easy way with Moniflo

Are cryptocurrencies too risky and stocks too time-consuming for you? Then mutual funds could be a good choice for you. We at Moniflo are convinced that even beginners can invest in funds. The big advantage is that you can invest small amounts and choose between different shapes and sizes. There is also the possibility to support sustainable funds.  

Are you wondering how to find suitable funds? The abundance of options also has the disadvantage that it is difficult to keep track of everything. In addition, the term "sustainable" is not protected and "greenwashing" is unfortunately also a big issue with financial products.  

This is also what we at Moniflo have been dealing with during our eighteen-month journey. Our big goal: to make investing transparent, affordable and accessible even for beginners: inside. We give you all the tools you need to invest with value in mind.

Do you want to invest in a long-term goal that fits your values? With Moniflo you can find sustainable funds and compare their impact using the "Impact Score". Just sign up for the list and be part of the app right from the start.

Learn more and register here!

Simply invest sustainably

Open an investment account that allows you to invest in funds that match your values.

Practice investing
Good to know

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Georges Bock is the CEO and founder of Moniflo. He sees money and investing as a way to shape the future by taking a bottom-up approach. He lives in Luxembourg with his family and his dog Yola and enjoys nothing more than watching his two children discover the world.


When will Moniflo be available for download?

At the end of 2022, you can already download a first version of the app to practice investing. However, if you want to buy and sell funds, you'll have to be patient. We expect to launch the final version of the app in early 2023. It's best to get on the waiting list to be among the first to test Moniflo.

Why doesn't Moniflo offer the option to invest in cryptocurrencies?

We want to build a platform for critical and conscious people who focus on long-term investments where the money serves a good purpose. Cryptocurrencies are highly volatile and speculative. Since they are not regulated, investors also do not benefit from the same high level of protection and risk diversification as with mutual funds. This does not fit with our vision of offering long-term investments.

How is Moniflo different from other investment platforms?

With our app, we want to reach all people who want to invest in a value-based way. We also focus on actively managed funds and not ETFs, as experts agree that ETFs have their limitations with regard to value-based investing. By the way, unlike other platforms, we do not charge any transaction or account fees. Moniflo is therefore also suitable if you only want to invest small amounts at first.

How can I be sure that the companies in the fund or portfolio I want to invest in are incorporating their values into their work and projects?

We work with Clarity AI, a provider of sustainable impact data, to obtain data for our Impact Score. This indicates whether the companies in the fund or portfolio are aligned with a specific UN Sustainable Development Goal (SDG). To calculate the Impact Score, Clarity AI tracks and measures a range of more than 60 relevant metrics linked to 52 SDG targets.

How is my money protected?

Moniflo will operate with a full investment firm license under strict EU laws and regulations. This means that your money is protected up to €20,000 by the Luxembourg Deposit Guarantee Scheme - and that your money and Moniflo investment account are safe.
We work with trusted partners and payment institutions to keep your cash deposits safe. Our payment partner Mangopay is subject to both national and EU payment regulations that ensure the safety of your money. In addition, your deposits are fully segregated and held in trust with unlimited protection. For example, your cash deposits up to €100,000 are protected by the Luxembourg Deposit Guarantee Scheme.

How is my data stored and backed up?

Your data is secured with 256-bit encryption so that only you and Moniflo can access your personal and financial information. We use state-of-the-art MPC technology that prevents unauthorized access to your investments. In addition, we employ multi-level security measures to protect your money and data, including secure servers.
In the course of providing our services and operating our business, we also share data with third parties who meet our security standards. You can read more about how and why we share your information in our Terms and Conditions.

Accounts and transactions are free of charge. How does Moniflo earn money?

Asset managers with investment funds on the Moniflo platform bear the bulk of the costs. They pay for their funds to be listed on the platform and pay for additional services. In the app, transactions and accounts are free. We expect that a small fee will be charged when users deposit or withdraw money from their investment account. The reason for this is to cover our internal costs, as well as to cover the costs of the payment provider.