Saving and investing side by side
| Saving | Investing | |
|---|---|---|
| Where | Bank or building society accounts | Shares, bonds and funds |
| Risk | Very low: your balance doesn't fall, though inflation can reduce what it buys | Values go up and down, and can fall |
| Growth over time | Usually lower | Usually higher over the long term, but not guaranteed |
| Best for | Emergencies and money you need within five years | Money you won't need for at least five years |
What you're actually buying
- Shares: a small piece of a company. If it does well, your share may be worth more, and you may get a slice of its profits, called dividends.
- Bonds: loans you make to governments or companies, which pay you interest.
- Funds: a pool of money from lots of people, used to buy many shares or bonds at once. An index fund simply tracks a market index, such as the 100 largest UK companies.
Risk and time
Investment values move every day, and sometimes they fall sharply for months or years. Over long periods, markets have historically grown, but there's no guarantee. That's why investing suits money you won't need for at least five years, and why your safety net should stay in cash.
Spreading your money across many companies and countries, called diversification, means one bad result can't do too much damage.
Where you can invest
- A stocks and shares ISA, with no tax on growth.
- A pension, with tax relief, but you can't take the money until later life.
- A general investment account, which has no tax benefits.
Before you start
Many people start investing once they have a budget that leaves money over, no expensive debt, a safety net in cash and their employer's full pension contribution. That's the route this site follows. How to start investing covers the practical steps.
Check you've got it
Three quick questions. Nothing is saved or sent anywhere.
Go further
Ready for the practical side? Read How to start investing.
Sources
We checked this page against these sources on 9 October 2026. Rules and allowances can change, so always check the latest position on GOV.UK.
This page is general information, not personal financial advice. Read our full disclaimer.