Are You Saving Or Are You Just Saving Up?

Peter's picture

One common regret of middle aged investors is that they did not start saving earlier. If only we weren't so careless with our money when we were younger!

Well I learned about saving fairly early on. The problem is, I wasn't really saving. I was just "saving up." Ever since I made that realization, I've started to grow my retirement nest egg and my savings are starting to accumulate nicely.

Saving Up

My early lessons in saving were always geared towards "saving up" for something that I wanted to buy. My parents often suggested this route as an alternative to them just giving me money. The idea was that I would put away a little bit at a time until I had "saved up" enough to buy the object of my desires.

I did this successfully several times. I distinctly remember saving up $100 to buy a Nintendo and a couple of games. Looking back, I'm not so sure that was money well spent! Except for the fact that I now have that experience under my belt and I've learned from it.

I knew I should be saving my money and I was. I'd save a little bit here and there and put it in the bank. However, well into my twenties, whenever I had "saved up" a certain amount of money, I started looking around for something to buy. I thought that money saved was for spending. I was "saving up" when I should have been saving.


Saving, as opposed to "saving up," is when you accumulate money and then you don't spend it. Instead, you invest it. Savings should be untouchable. Savings take advantage of investment growth and compounding. Savings work for you.

When you are saving, you are building up an asset. You are building your net worth. Your savings are a big part of the answer to the question: What do I have to show for all the hours I've spent working?

Dipping Into Savings

Don't do it! If you are ever short on cash, the last place you should look is at your savings. Savings are not for spending. If you start spending your savings, you'll be undoing all your past hard work. You'll be stunting your savings' ability to generate income and to grow.

Instead, you should have a separate account for your "saving up" activities or any emergency spending requirements.

Learning The Difference

Even though I started saving my money fairly early on, it wasn't until much later that I came to appreciate the difference between saving and simply "saving up."

How about you? Have you got the difference straight? When did you first realize the difference? Leave a comment if you'd like to share your experiences.


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I'm not sure I agree. I

I'm not sure I agree. I despise the term "net worth." I'd like to think I'm ultimately worth more to people around me than the mere sum of my financial assets. I save to spend! Maybe not on impulsive caprices, but I save to spend on security in retirement, a house to call my own, maybe a particular car I may appreciate in the future. I certainly don't save to inflate the sum total of my assets, then wear that as a badge of honour.

Peter's picture

Although I was using it in

Although I was using it in the strictly financial sense and not the value-as-a-person sense, I'll agree with you on the "net worth" comment. Perhaps a better term would be net wealth.

As far as saving goes though, I'm approaching the subject from the point of view of leaving the "rat race" as early as possible. To do that, I need to save. I certainly don't consider my savings to be a "badge of honour." The money is a tool to assist me in living the life I want to live. I need to build up an investment portfolio that will produce enough income so that I don't have to work for money. I can't start spending those savings or else I'll be putting myself right back on the starting line again. I'll be ensuring that I'll have to work for money until I'm at least 65.

I do full intend to spend the income my savings produce though. I also still "save up" for things that I want to buy. I just make a clear distinction between my savings and my "saving up." Savings, for me anyway, aren't for spending.

I can't believe you just

I can't believe you just said you are not sure your Nintendo was worth it! Trust me it was worth it!

Peter's picture

OK, yeah, the Nintendo was a

OK, yeah, the Nintendo was a lot of fun. Maybe even $100 worth of fun. I definitely wish I had passed on the Power Glove though ... that was a big waste of money!

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