How Much Should I Invest and Save?

Whether you’ve received a windfall or you’ve simply built up a sum of money from your regular income, it isn’t always easy to know what to do with it. Saving and investing can seem to pull you in different directions, one feels safe, the other feels like a risk. So which is the right choice? 

The honest answer is that the question itself might be the wrong one. Saving and investing aren’t competing options, they’re complementary parts of the same strategy and financial plan. Understanding how they work together is the first step to making your money do more for you. 

How Are Savings and Investments Related? 

Savings and investments serve different but equally important roles in a well-rounded financial plan. Savings provide stability, liquidity, and protection against the unexpected. Investments offer the potential to grow your wealth over time. Neither works as well without the other. 

Getting the balance right isn’t a one-size-fits-all calculation, it depends on your goals, your timeline, and your financial situation. The five steps below are a practical framework for thinking it through. 

1. Compare Interest Gains to Inflation 

The first thing to understand is that leaving money in a current account is not a neutral decision. It’s a slow loss. If your account earns little to no interest and inflation is running at, say, 3% per year, a balance of €100,000 is effectively losing around €3,000 in purchasing power every year, even though the number on your screen stays the same. 

According to the Central Bank of Ireland’s Money and Banking Statistics, Irish households hold tens of billions of euros in overnight deposits earning minimal returns. Knowing what inflation is doing to your savings in real terms is the starting point for making better decisions about where your money sits. 

2. Set Aside an Emergency Fund and Planned Purchase Money 

Before thinking about growth, think about protection. A financial plan should always include a cash reserve you can access quickly, and most financial planners recommend setting aside at least three to six months’ worth of living expenses in an easily accessible account.  

This is your emergency fund, and it should be kept separate from money you’re saving for a specific goal or looking to invest. 

A credit union account or An Post savings account can be a good home for your emergency fund. Both are accessible when you need them, but removed enough from your day-to-day banking to stay out of sight and out of mind, which makes it far less tempting to dip into your fund for non-emergencies. 

Alongside your emergency fund, consider any significant planned purchases in the next one to five years: a wedding, a home deposit, a car, a holiday or clearing a debt if you’ve come into a lump sum.  

Money earmarked for these purposes should also be kept in accessible savings, not tied up in investments where an early exit could cost you. The key principle: if you might need it soon, keep it somewhere you can reach it. 

3. Consider Low-Risk Growth Options 

Once your emergency fund and planned purchase money are set aside, any remaining savings can start working harder. There are a number of lower-risk options in Ireland worth considering: 

• Deposit accounts with competitive AER: Regular saver and fixed-term deposit accounts often offer better rates than standard current accounts. The Competition and Consumer Protection Commission (CCPC) offers a useful comparison tool at ccpc.ie. 

• Deposit Guarantee Scheme: Savings held in Irish banks are protected up to €100,000 per person per institution under the Irish Deposit Protection Scheme. If you’ve recently received a large lump sum such as an inheritance, up to €1 million may be protected for six months, giving you time to decide on the right course of action. 

• An Post State Savings: Products like Savings Certificates and Savings Bonds are backed by the Irish Government and exempt from DIRT (Deposit Interest Retention Tax). They require you to lock away your money for a fixed term, but the tax-free return makes them worth comparing to standard deposit accounts on a like-for-like basis. [Text Wrapping Break]That said, it’s worth circling back to step one: even a tax-free return needs to be weighed against the current rate of inflation. If your savings aren’t growing at a rate that at least keeps pace with inflation, your money is still losing purchasing power in real terms, just slower than it would in a current account. 

4. Explore Investments for Greater Returns 

For money you won’t need for at least five years, investing offers the potential for significantly better returns than any savings account. The stock market involves more risk than a deposit account, returns aren’t guaranteed and the value of investments can go down as well as up, but for long-term wealth growth, it has historically outpaced inflation and savings rates. 

Managed funds are often a practical starting point for people new to investing, as they spread your money across a range of assets, reducing the impact of any single investment performing poorly. The key is to be honest about your time horizon and your risk appetite before committing. 

The table below compares the key features of saving versus investing to help you think through which fits different parts of your financial plan: 

 Saving & Investing compared 

5. Seek Advice from a Qualified Financial Advisor 

There’s no universal formula for how much you should save versus invest, the right split depends on your income, your outgoings, your goals and how comfortable you are with risk. A qualified financial advisor can help you work through all of this and put a plan in place that fits your actual circumstances. 

At askpaul, our financial planning consultations are designed to help you get a clear picture of where you stand and what to do next. Whether you’re looking to build a savings strategy that beats inflation or you’re ready to explore investment options for long-term growth, the first conversation is free.