Why is investing better than saving?

September 23, 2025

Many people wonder whether they should simply save their money in a bank account or start investing. In this blog, we explain why investing is often better than saving if your goal is to grow wealth over time and build long-term financial security.

Saving: safe but limited

Money in a savings account is secure and easy to access. Banks also protect deposits up to a certain amount, making it a low-risk option. However, savings typically earn very low interest rates.

Another important factor is inflation. Inflation means that prices of goods and services rise over time. If prices increase faster than your savings grow, your money loses purchasing power. For example, €1,000 today will not buy the same amount of goods and services ten years from now if inflation continues. One reason inflation occurs is that central banks increase the money supply by printing more money or through policies that expand credit in the economy. This makes each unit of currency worth slightly less over time (European Central Bank, 2025).

Investing: growth through returns

Investing means putting money into assets such as stocks, bonds, or ETFs. The goal is to earn returns through growth, dividends, or interest payments. While investing involves more risk than saving, it also creates more opportunities for wealth building.

Over time, investing benefits from compound interest. This means that not only your initial investment grows, but also the returns generated start earning additional returns. This snowball effect can create significant growth over long periods.

Why investing outperforms saving long-term

Historically, the S&P 500 index has provided average annual returns of approximately 10% before inflation. After adjusting for inflation, the average annual return is around 6.5% to 7% over the long term (Investopedia, 2025). In comparison, savings account interest rates in the Euro area are often below 2%. For instance, as of July 2025, the average interest rate on new deposits from households with an agreed maturity of up to one year was 1.72% (European Central Bank, 2025).

To illustrate: €100 saved at 1.72% for 20 years grows to about €138. The same €100 invested at 7% grows to nearly €387. The difference becomes even larger the longer you invest.

Although investing carries risk and market values can go up and down in the short term, history shows that investing generally builds far more wealth than saving when viewed over decades.

When saving still matters

Saving is still essential in some cases. An emergency fund of three to six months of living expenses is best kept in a savings account, since you may need quick access to it at any time. Similarly, money for short-term goals such as a holiday or buying a car should not be invested, as market volatility could reduce its value when you need it.

Conclusion

Saving is important for security, but if your goal is to build wealth and stay ahead of inflation, investing is usually the better choice. The key is balance: use savings for stability and emergencies, and use investing for long-term growth.