In Focus – SCCCU Blog

Question: I’m trying to be smart with my money, but I'm unsure how much I should save versus invest. How do I figure that out?

Answer: It’s a tricky question, but a common one. Income is a limited resource, which means we don’t live in a world where it’s possible to max out every financial goal we have. We’re juggling rent or a mortgage, debt payments, child care costs, and a grocery bill that seems to get larger monthly. The real question is: How do you balance saving and investing for today and your future? Here’s how to make the most of what you have, without getting overwhelmed.

Start With Savings: Your Emergency Fund Comes First
Building a solid financial foundation is essential, and that begins with your emergency fund. Ideally, you’ll aim to have 3–6 months’ worth of living expenses saved in a liquid, accessible account—ideally, a high-yield savings account. Why is this important? Because life happens. Cars break down. Jobs are lost. An emergency fund allows you to weather those storms without going into debt or tapping into your long-term investments at the worst possible moment.

If you’re starting from scratch and 3-6 months’ worth of funds sounds daunting, try building up $500, then $1,000, and so on. From there, try to save one month’s worth of living expenses, then two, and so on. One of the best ways to get there quickly is to automate your savings—transfer a set amount each payday so you build your account balance without even thinking about it.

Then Invest — And Keep An Eye on Retirement Benchmarks
Once your emergency fund is on solid footing, your next focus should be investing for the long term, specifically, retirement. And no, it’s never too early, or too late. As they say, the best time to start was yesterday, and the second-best time is now!

So, how much should you be investing? Aim to get to the point where you are putting away 15% of your total income, including any matching dollars from your employer. Doing that consistently should put you on track to achieve this useful set of retirement savings benchmarks developed by Fidelity Investments:

• By age 30: Save 1x your annual income
• By 40: Save 3x your income
• By 50: Save 6x your income
• By 60: Save 8x your income
• By retirement: Save 10x your income

If you’re behind, don’t panic—these are milestones, not mandates. Start where you are, and keep going, trying to nudge yourself up 2% at a time, at least once a year or whenever you get a raise.

The best way to save for retirement is to put your money in tax-advantaged accounts, where it can grow tax-deferred, if not tax-free. If you have access to a 401(k) through your employer, especially one that offers a match, start there. Employer matching contributions are literally free money. If you’re not contributing enough to get the full match, make that your priority.

If your employer doesn't offer a retirement account, consider an IRA (Individual Retirement Account). Traditional IRAs and Roth IRAs have unique tax benefits, so do your research to find out which one’s right for you.

Remember: Life Isn’t Just About Retirement and Emergencies
Here’s the thing: Saving and investing shouldn’t only be about avoiding disaster or preparing for life at 70. You have other big dreams and plans—think vacations, weddings, down payments, starting a business, or having a baby. These things require cash and deserve space in your financial strategy.

They’re usually best funded with short- to mid-term savings rather than long-term investments. The key? Create separate savings accounts for each goal. Label them clearly — "Italy 2026" or "Baby Fund" — and contribute to each regularly. This makes it easier to track your progress, stay motivated, and avoid “accidentally” spending the money on something else.

The Dance of Competing Priorities
Now that you’ve lined up multiple goals, how do you prioritize? The answer will be different for everyone. For example:

• If you don’t have an emergency fund, that should be goal number one.
• If your employer offers a retirement match, snag that ASAP — it’s too good to pass up.
• If you have high-interest debt (like credit cards), paying it down should be a major focus. Once you’re debt-free, the money you were putting towards your debt can be socked into your emergency fund or retirement account.
• If you’ve got a time-sensitive goal (like a wedding next year), toss as much cash into that fund as possible, once you’ve secured your employer match on your retirement account.

It’s always a dance — a balancing act at times, and it may change from year to year, or even month to month. The most important thing is that you’re being intentional with your money. You’re looking at the whole picture and making choices aligning with your values and timeline.

A Budget is Your Best Friend
If all of this sounds a little overwhelming, don’t worry. There’s an important tool that can help you stay on track and feel less stressed about your financial goals—a good old-fashioned budget. A budget can help you see exactly how much money is coming in, where it’s going, and where you might be able to shift some dollars to make room for saving and investing.

The Bottom Line
When it comes to saving versus investing, it’s never an either/or proposition. You always need both. Your savings protect you in the short term, and your investments are how you build wealth for the long term. So, name your goals, and set your priorities.