Tackling the savings vs investing gap

When it comes to managing family finances, one of the biggest challenges couples face is balancing the need to save with the desire to invest.

From setting joint financial goals to managing your budgeting and investment strategies, it’s important to ensure you and your partner are on the same page.

Let’s discuss how you can bridge the savings vs investing gap while achieving your family’s long-term financial objectives.

Saving vs investing: what’s the difference?

Saving is the act of setting aside money for future use, usually in a safe and accessible form like a savings account or cash deposit.

The primary aim of saving is security – ensuring that you have the funds available when you need them, particularly for emergencies or short-term goals like holidays or home repairs. Savings are generally low-risk but also low-return, meaning you’re not likely to see significant growth.

Investing involves putting your money into assets like stocks, bonds or property to generate higher returns over time. The risk is higher, but so is the potential reward. Investing is usually a longer-term strategy, ideal for milestones like retirement or funding your children’s education.

Unsure of how much you should have in savings vs investments? Read our handy guide on the key differences between the two strategies here.

As a couple, it’s worth establishing clear financial objectives that you both agree on. These might include:

• Holidays and travel: A short-term goal like saving for a family holiday will require a different approach to budgeting compared to long-term goals.
• Mortgage payments: Paying off your home is likely to be one of your biggest financial decisions, and it’s important to plan how this fits into your savings and investment strategies.
• Children’s education: Whether you’re saving for school fees or university tuition, this is a long-term goal that will require a disciplined approach.
• Retirement planning: Thinking about retirement can feel like a far-off concern, but planning early is essential to ensure financial security in later years.

Once these objectives are identified, it’s time to figure out how to navigate them.

How to approach savings and investments together

Role-divided approach

One common approach is for couples to divide their responsibilities. For example, the person who is more comfortable with the idea of taking risks may take on the role of managing the investments, while the one who prefers stability can be in charge of the savings.

This can work well when both partners recognise each other’s strengths and trust each other’s judgement. However, it’s important to keep the lines of communication open, ensuring that both of you are aware of the progress in both areas. Regular discussions about financial priorities are important, even if you focus on different aspects.

Shared responsibility approach

Alternatively, you might choose to take a more collaborative approach, where both you and your partner share responsibility for managing both savings and investing as a family. This can be a good option if both partners are equally comfortable with making financial decisions, and it allows for open discussions on strategies and risks.

This means you can both have a deeper understanding of the family’s financial health, but it can be more time-consuming if there are disagreements over how to proceed.

Regular discussions about financial priorities are important, even if you focus on different aspects.

Even if you have experience in saving and investing, it might be worth speaking to a financial adviser. They can help you set clear goals and provide recommendations on how to optimise your family’s finances.

They can also guide you on matters like tax-efficient investing and how best to utilise products like ISAs (Individual Savings Accounts).

Bridging the gap between savings and investments

Now that you’ve agreed on a strategy, it’s time to put it into practice. Bridging the gap involves careful planning, as well as understanding the role both savings and investments play in your financial goals.

Create an emergency fund first: Before you start investing, make sure you have a solid emergency fund in place. Aim for at least three to six months’ worth of living expenses saved in an easily accessible account. This fund will protect you in case of unexpected events such as job loss or medical emergencies.

Use tax-efficient accounts like ISAs: Both savings and investments can be enhanced by using ISAs. Cash ISAs allow you to save money tax-free, while Stocks & Shares ISAs are better suited for long-term investments.

Set up joint budgeting tools: A shared budgeting tool or app can help manage household finances. You can categorise your spending, set up savings goals and keep an eye on your investment portfolio.

Prioritise long-term goals over short-term wants: While it’s tempting to dip into savings for immediate desires, such as buying a new car or going on a shopping spree, try to prioritise your long-term goals where possible.

Build a collaborative financial future with True Potential

Navigating savings and investments is not about choosing one over the other. Instead, you need to find the right balance that works for your family’s needs.

Whether you divide responsibilities or share the load equally, the key is open communication and a clear, joint strategy. Our financial advisers can help, whether that’s guiding you on emergency savings or retirement advice. Get in touch today to discuss further.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.

Tax is subject to an individual’s personal circumstances and tax rules can change at any time.

ISA eligibility and tax rules apply.

True Potential Wealth Management is authorised and regulated by the Financial Conduct Authority. FRN 529810. Registered in England and Wales as a Limited Liability Partnership No. OC356611.

True Potential Investments LLP is authorised and regulated by the Financial Conduct Authority. FRN 527444. Registered in England and Wales as a Limited Liability Partnership No. OC356027.

True Potential LLP is registered in England and Wales as a Limited Liability Partnership No. OC380771.