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Thinking Beyond Savings: 3 Ways to Help You Get Started

Marcus by Goldman Sachs is excited to share this insight from our friends at Goldman Sachs Personal Financial Management.

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By Paul Bennett, Vice President, Goldman Sachs Personal Financial Management

Building up your cash reserves is one of the most fundamental aspects of financial planning and resilience. Not only can your savings come in handy during an emergency, but they can also help you take advantage of a potential investing opportunity when it comes along.

The low-rate environment we’ve seen in recent years, however, can be tough on savers who are trying to grow their money. And when combined with high inflation, there can be a real psychological disincentive to save more.

For instance, when inflation is high, some individuals may feel the need to buy or spend more now for fear of prices going up later on.

So how should we think about savings given the low-rate, high-inflation landscape? How can we maintain a long-term view and plan for the future?

When I talk to people who are just starting out in their financial planning journey, I often tell them to first get their savings in order, which means having enough in their emergency fund to cover at least three to six months of living expenses.

Then, I encourage them to think beyond savings and consider investing for growth. Because in a low-rate environment, savings alone may not be enough to help you keep up with inflation, which can debase the value of money (i.e., your purchasing power) over time.

Understanding the difference between savings vs. investing

Before we talk about investing for growth, let’s go over the basic difference between savings and investing. Some people use those terms interchangeably, but they’re not the same thing.

When you save, you’re usually putting your money away somewhere safe, like in a FDIC-insured bank account, for short-term goals. This could mean a high-yield savings account or CD, where your money can earn interest.

On the other hand, with investing, you’re putting your money into the market with hopes of potentially earning a better return over the long term (compared to interest earned through a savings account). You can invest in securities like stocks, bonds and ETFs.

A key difference between savings and investing is risk.

Investing involves more risk — while you have the potential to earn a better return, you could also lose your money in the process. This is why it’s so important to nail down your goals and understand your tolerance for risk.

Reaching your goal starts with saving for it. 


Whatever your goals may be, they can be divided into two broad buckets: short-term and long-term goals.

Generally speaking, you would save for short-term goals like buying a car or taking that dream vacation – the money is set aside in a low-risk, accessible deposits account.

You would typically invest for long-term goals like paying for your kid’s college or saving for retirement. The longer time horizon gives your portfolio the time it needs to potentially grow.

And yes, while investing can be risky, keep in mind that historically, over the long term, the markets have provided higher returns than interest rates earned through a traditional deposit account.

Why it’s important to consider investing for growth

As a financial advisor, I work with a variety of clients – retirees as well as those who are just starting out on their financial planning journey.

A common frustration I hear is not being able to earn as much through the usual savings vehicles due to low interest rates. This can be a real disincentive to save more (or at all).

But as I explained to my clients, when interest rates are low, it’s not really about whether you should put more or less money away. It’s about finding the right financial vehicles that can help retain the value of your money.

At a time when we’re seeing continued low rates and worrisome inflation, I encourage those who have their savings in order to consider investing for growth. That’s because sound investments can give you a chance to hedge for inflation, protecting the value of your money as the cost of living goes up.

Thinking beyond savings 

Now, to be sure, I’m not saying that you should put savings on the backburner. Rather, I’m simply encouraging you to think beyond savings vehicles when it comes to building wealth, especially given our current rate and inflation environment.

Here are three things you could do to get started.

1. Check in on your savings

Have you put enough aside for your emergency fund? The rule of thumb is to have enough to cover at least three to six months of expenses. But depending on your personal situation, you may need to save more. Consider working with a financial advisor to figure out the appropriate amount for your needs.

2. Consider the right vehicles for your short-term and long-term goals

Throughout much of our lives, we’ve heard how important it is to “save” for our goals. But as our financial life evolves, sometimes you may also need to invest for those goals.

As I mentioned earlier, both saving and investing have their respective roles to play in building wealth. So, it’s important to pick the right vehicles for your goals. When should you save and when should you invest? 

Generally speaking, for certain short-term goals, putting money away in a savings account makes sense. For longer-term goals, however, investing may be the more appropriate option.

3. Talk to a financial advisor about investing

When it comes to investing, some people may hesitate to get started because of the potential risk or they may feel as if they don’t know enough.

If this is you, consider talking to a financial advisor who could help address your concerns and provide professional guidance.

In my experience, new investors tend to make the common mistake of mismatching assets to timeframe. But this is not something you have to figure out on your own! A financial advisor can help bring clarity and put together an investment plan that’s aligned with your goals and risk tolerance.

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United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC (“GS&Co.”) and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization. Advisory services are offered through United Capital Financial Advisers, LLC and brokerage services are offered through GS& Co., member FINRA/SIPC.

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