Saving Money IS Investing – So Act Like An Investor

In this article I’m going to share with you how saving money (putting your money into a savings account) is investing and how you can begin to act like an investor with your savings.

Saving Money Is Investing

I was visiting the MBN forums a few days ago and I ran across an interesting concept.  Some fellow bloggers were discussing saving vs. investing and how comfortable we each feel in sharing “advice” on both of those subjects on our blogs.

I’m definitely more comfortable discussing the former (now here I am trying to do an investment piece).

Then someone clever chimed in with “saving money IS investing.”  When you save you are investing in the US dollar.  I guess that’s right.  Although you rarely think of it that way.  So, even if you only have a savings account and no true equity account (i.e. stocks, mutual funds) YOU ARE AN INVESTOR.

How To Act Like An Investor

Now that we’ve established that YOU, the saver, are also an investor, let’s examine how you should act as an investor with your savings.  I’ve listed 5 things that investors do that you should possibly be doing with your savings:

1. Have an Objective – While there’s nothing wrong with savings money without a reason, I’ve found that it’s easier to stay motivated to save if you have a objective or goal for your savings.  So make sure you know WHAT you’re saving for.  Need ideas?  A few good goals for your short-term savings are: money to be used in an emergency (or a rainy day); money that you need for a future big purchase (like a car or vacation); money to be used to pay future debts (like property taxes).  Once you know your purpose, it’s easy to put an exact dollar amount and time frame for your goal.  Make sure you include those when defining your objective.

2. Know Your Risk Tolerance – Part of being able to invest properly is a good knowledge of one’s own risk tolerance.  How comfortable are you with risking your savings for a bigger return?  Take the risk tolerance quiz.  To be honest, there’s not much risk to be found in short-term savings.  Short-term cash savings is on the low end of the investment spectrum when it comes to risk, so you won’t need much tolerance to be comfortable with most savings options.  However, I know some people still keep money under the mattress or in their checking account only.  So they’re either very risk averse or they are stupid.

What’s my point?  Just make sure the institution you use for your savings is covered under the Federal Deposit Insurance Corporation (FDIC).  Federal deposit insurance protects the first $100,000 of deposits that are payable in the United States.

3. Proper Allocation – In investing terms, allocation is referring to as spreading your money across different asset classes.  Well, cash is one of the major asset classes, so you need to look within this category to the sub-classes of bank savings, money market accounts, certificates of deposits, actual gold, and yes, literally under the mattress.  To be properly allocated you’d want your savings to be spread out across these types of cash assets.  What I learned from this is that I actually might want to put some money in my home (not under the mattress, but in our safe).  Maybe a couple of hundred?

4. Get Solid Returns – Make your savings work for you.  You should be earning at a minimum 3% on your cash savings (at the date of this article June 2008).  Not getting that from your bank?  Visit this listing of FDIC insured high-yield savings and checking accounts for find a nice place to get solid returns.  Some CDs might be able to get you more of a return.  Shop around and get the best deal.  Just make sure you’re not chasing teaser rates.

5. Track Your Investments – Just like the wise equity investor who watches the stock ticker, you should periodically monitor your savings balance and rate to ensure: you’re still meeting your objectives, properly allocated, and getting the solid returns you’re looking for.  I wouldn’t obsess over it everyday, but once a month you should take a peek and see how you’re doing.  Good luck.

Got any other ways to act like an investor with your short-term savings?  List them in the comments below.

Photo: source

About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.


    Speak Your Mind


  1. I completely agree about savings really meaning investing

    You SAVE to INVEST in a brighter, more stable future!

    however, sometimes I feel the line of “investing” and “saving” overlap and create gray areas.

    Instead of using “high interest rate” methods, it is hard to NOT take the 10% AVERAGE RATE of the stock market by using an indexed fund to the S&P 5000, DOW, etc.

    Based on risk levels and knowledge, these small risks may not be taken when the rewards are so much greater!

    THANK YOU for blogging and sharing information and knowledge!

  2. RC@ThinkYourWayToWealth says

    Good points-it can definitely be considered investing. With today’s inflation, if you have your money in a traditional bank you will lose money. So by “investing” in a high yield account, at least you are keeping that portion of your money closer to even than losing purchasing power.

  3. @FFB – Inflation stinks…at least it’s somewhat consistent in the US.

    @Deb – “there are the returns to your esteem that occur when you can handle an emergency” Excellent point! When I talked about risk tolerance I should have brought this up. Thanks for your comment.

  4. otherdeb (Deb Wunder) says

    Great article! And I love the idea of changing your mindset to one that looks at saving as investing.

    There is, however, one other aspect to this assertion: One of the things you are investing in is your well-being. Beyond the financial returns of saving, there are the returns to your esteem that occur when you can handle an emergency without having to be bailed out by a friend or relative.

    And that aspect should govern your investing/saving behavior insofar as making the best choices you can make in terms of educating yourself about finances so you can use your critical thinking abilities to make the choices that will work bet for you in terms of saving/investing.

  5. Granted, if you take inflation into account then savings accounts and many CD’s may break even at best. But still, for someone not accustomed to saving or is not yet comfortable with stock investing, this is a great way to look at things. Savings aren’t “only” savings. They are an investment!

  6. Point taken. Cash is not king, nowadays. And I would definitely not suggest putting all your cash in cash. 🙂 BUT, just because it’s a “poor” investment doesn’t mean it’s not an investment (imo).

    It’s just a mindset change I’m getting at here. Treat your cash, and all your assets (things you own), with the same regard as your equities. If it’s not getting the return you want (not meeting your objectives), then dump it for another asset class.

    There are no gaurantees with returns regardless of asset class.

  7. Llama Money says

    Investing in the US dollar might be about the worst investment around today. Considering the real rate of inflation is far above the 3% ish that you’ll see on a high-yield saving account.. you are guaranteed to lose purchasing power.

    Of course you need savings, but to see it as an investment? I don’t. If I’m guaranteed to lose money, then it’s not an investment ( to me ). It’s like people who call their cars investments.