With interest rates low and the cost of living going up the real value of your savings is actually going down.

What's the difference between saving and investing? video image
Video transcript

Should you save your money or invest it? Keeping money in a savings account can seem like the safer bet. But with interest rates low and the cost of living going up the real value of your savings is actually going down.

For example if inflation is running at 2 percent and a savings account is providing only 1 percent interest your cash is guaranteed to be going down in value. In other words with investing you're swapping the certainty of cash losing value for the possibility that your investment might grow.

Investments involve more risk than savings but they also offer the opportunity for greater returns. You can invest independently by buying property or stocks and bonds. It's a more granular approach and can demand a lot of your time and often with high transaction fees.

On the other hand you can choose to put some of your savings into an investment product known as an investment fund or an investment trust. These are managed by a fund manager who researches and makes investment decisions based on experience in the market and current trends.

The goal is to increase the value of the fund or trust and then share the rewards between the pooled investors. With any type of investment the potential for greater return comes with a higher level of risk because the value can go up or down. So there is always a possibility your investment could end up being worth less than what you put in.

Deciding which investment is best suited for you is understanding what your financial goals are and how much of a risk you're comfortable with.

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