Investing vs. Saving: Which Should You Prioritize First?

Balancing saving and investing is a challenge for many. Both are important, but which should come first depends on your financial starting point and goals.

Start with a Safety Net

Before investing, build an emergency fund.

• Aim for 3–6 months of living expenses.

• Keep it in a high-interest savings account for quick access.

• This protects you from relying on debt when unexpected costs arise.

Without a safety net, you risk pulling money out of investments at the wrong time.

When to Focus on Saving

Saving takes priority if:

• You have high-interest debt. Pay this off first.

• Your income is unstable or seasonal.

• You lack funds for emergencies or big upcoming expenses.

Short-term goals like a vacation or car purchase should also be funded through

savings, not investments.

When to Shift to Investing

Once your emergency fund is set and high-interest debt is cleared, direct extra money toward investing.

• Use tax-advantaged accounts like RRSPs or TFSAs in Canada.

• Start early to benefit from compound growth.

• Diversify across stocks, bonds, and other assets to manage risk.

Combining Both

If your emergency fund is partly built, you can split contributions—continue adding to savings while putting a small portion into investments. This helps you grow wealth without delaying your investment start date for years.

Bottom line: Save first for stability, then invest for growth. The faster you secure your financial safety net, the sooner you can put your money to work.