Should you put your money in a savings account or invest it?
Dominic Beattie
- Group Editor
- Experienced finance editor
- Writer
- Commentator and researcher
Do you like & trust our expert, human-written content?
Simply click this button to tell Google you want to see more of us in your Google Search Results, AI Overviews and AI Mode answers.
- Investing in the share market means risking losing your money, but the potential returns are high.
- Deposit products tend to have far lower returns, but also much less risk.
- Savings accounts can be a good option if you have a near term saving target, while in the long run investing in ETFs or index funds can mean growing your wealth.
Investment risk and potential returns are usually positively correlated. Investing in the share market always means risking losing the money you've put in, but if the investment pays off you can see big returns. Savings accounts typically have much more modest returns, but what you'll earn is all but guaranteed and it's very unlikely you'll lose money. Choosing between the two depends on your appetite for risk as well as your circumstances.
How do you earn money on savings accounts?
Interest earned on a savings account is usually calculated daily, then paid at the end of each month. If you provide your tax file number, your bank generally won't withhold tax, but you'll have to declare it as income and it will be taxed at your marginal rate.
Many of the most popular savings account products in Australia have bonus rates - conditions that you'll need to satisfy each month to earn the top return. This often means needing to deposit a certain amount each month or make a number of transactions using a linked spending account. The base rate is often much lower than the bonus rate so you'll want to investigate.
Investing options in Australia
If you're looking to invest in the stock market your main options are to buy individual shares or invest in a fund that owns shares in lots of different companies.
When you buy individual stocks you effectively own a small fraction of the company. Depending on supply and demand, the share price goes up or down which increases or decreases the value of your investment. The potential returns are huge - investors who bought Nvidia shares in early 2023 saw growth of nearly 800% over the next couple of years - but it's also possible your investment will be a dud and you'll lose some or even all of what you put in.
Funds are generally seen as safer since the risk is spread across different companies or even sectors. Some funds are what's called actively managed, with an investment manager picking out stocks, while others simply aim to replicate the composition of an index. An ASX 200 index fund for example always holds shares in the 200 largest stocks listed on the Australian Stock Exchange.
Read more: Investing in the share market vs property investing
What is an ETF?
Exchange-Traded Funds (ETFs) are an increasingly popular option where you buy units in the fund, which are traded on an exchange. ETFs are often passive investments tracked to an index, aiming to go with the market rather than beat it. As ASX 200 companies grow their share prices, an ASX 200 ETF would also increase. However, while the risk of losing money is less compared to picking individual shares, market downturns are always possible and there's no guarantee your investment will make you money.
Returns: ETFs vs savings accounts
ETF returns
Here are the returns over the decade from December 2015 to December 2025 from some of the most popular ETFs available:
| ETF | Decade return | Average annual return |
|---|---|---|
| iShares Core S&P/ASX 200 ETF | 63% | 6% |
| iShares Global 100 ETF | 269% | 27% |
| BetaShares NASDAQ 100 ETF | 407% | 41% |
| iShares Global Healthcare ETF | 100% | 10% |
Source: Commsec
It's important to remember past performance doesn't guarantee future performance - the BetaShares ETF for example is a tech themed ETF that has seen huge growth over the past few years which may or may not be replicated in future.
Savings account returns
Savings account returns tend to fluctuate with the RBA cash rate. When the cash rate goes up, savings account returns also tend to increase, and when the cash rate goes down savings account rates do likewise. If you have a savings account balance for a few years, chances are your rate will change significantly over that time - you might be earning over 5% p.a. when interest rates are high while when rates are low you might be lucky to return 2% each year.
Why choose a savings account?
The potential returns on savings accounts are generally lower than an ETF that's performing well. The main appeal of savings accounts is typically that returns are predictable and your money is all but guaranteed. In the highly unlikely event the bank you've got an account at goes bust, under the Financial Claims Scheme the Government will ensure you're paid back up to $250,000.
In the long run, the stock market has consistently trended upwards, even taking into account negative shocks like the global financial crisis or Covid. That means if you invest in ETFs that track the performance of an index, chances are that eventually you'll see a return over time exceeding what you could have earned over the same period just putting your money in savings accounts.
In the short term though, market fluctuations can see the value of your investments drop significantly below what you put in. Imagine someone who invested in an ASX 200 fund at the start of 2020. During the pandemic, the value of their investment probably would have been down more than 40%, and they might not have been in the green until late 2021. This could have been a real issue if this hypothetical investor had been saving for a wedding in December 2021. On the other hand, had that money been in savings accounts while the returns would probably have gone down with the cash rate, there's no chance the investment would have ever dipped below what was put in.
Savings.com.au’s two cents
Warren Buffett might be known for picking stocks, but these days he recommends investors go for ETFs and index funds rather than trying to "pick winners".
"The goal of the non-professional...should be to own a cross-section of businesses that in aggregate are bound to do well," he wrote in a 2013 letter to Berkshire Hathaway shareholders.
Investing in something like an ASX 200 fund means that unless there's an unprecedented economic collapse in Australia, over a long enough time frame you should see a return on your investment - probably more than what you could have earned in a savings account. However that doesn't mean you should dismiss savings accounts entirely. Market fluctuations mean at any one time there's always the risk of the value of your ETFs declining, so if you're saving for something in particular (a holiday for example or retirement) the closer you get to the date the riskier it is to have your savings in the share market.
Diversification and liquidity are two other big drawcards of savings accounts. One of the most important principles of investing is to spread your exposure across different sectors and assets, so particularly if you're risk averse it might make sense to have a portion of your wealth safe in a high-interest savings account. That also typically means that you can access the money whenever you need it with a linked transaction account, as opposed to having to sell your units or stocks which can take several days before you see the cash.
Looking to put your savings to work for you? Below is a selection of the savings account products available in Australia at the moment, with some of the strongest rates.
| Bank | Savings Account | Base Interest Rate | Max Interest Rate | Total Interest Earned | Introductory Term | Minimum Amount | Maximum Amount | Linked Account Required | Minimum Monthly Deposit | Minimum Opening Deposit | Account Keeping Fee | ATM Access | Joint Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.05% p.a. | 5.50% p.a. Intro rate for 3 months then 5.05% p.a. | $1,047 | 3 months | $0 | $99,999 | $0 | $0 | $0 |
| Promoted | Disclosure | ||||||||
2.25% p.a. Bonus rate of 3.15% Rate varies on savings amount. | 6.00% p.a. Intro rate for 4 months then 5.40% p.a. | $1,134 | 4 months | $0 | $499,999 | $0 | $0 | $0 |
| Disclosure | |||||||||
4.00% p.a. | 5.90% p.a. Intro rate for 4 months then 4.00% p.a. | $936 | 4 months | $0 | $249,999 | $0 | $1 | $0 | Disclosure |
Article first published November 2019 by William Jolly, last updated December 2025.
The information in this article is general only – seek tailored financial advice for your personal situation.