Investing vs saving are two different ways of managing finances, with one requiring consistent monitoring while the other is more passive. With inflation a persistent concern in the eurozone, individuals in Hoand have to decide whether to take on moderate or higher risk. Let’s break down whether saving as investing really yields returns.
- Investing vs saving have a similar goal in mind, but the approach differs in the level of risk
- With inflation often outpacing savings interest rates, holding cash can result in a real-term loss of wealth.
- Savings accounts offer safety and access, but they generally fail to build significant wealth over the long term.
- Diversifying into assets like stocks, ETFs, or crypto can help beat inflation and achieve compound growth.
What is investing
Investing is allocating capital to financial instruments to generate returns. While investing comes in different forms, from passive to active, the idea is the same. But unlike saving, which focuses on preserving capital with low yields, investing aims to take on some risk and generate returns above inflation.
When someone invests, they are looking at a market and position themselves based on their beliefs and knowledge. That’s why generating higher returns from investing is more difficult than it sounds, especially for new investors.
Investing vs saving
Saving means setting money aside for use later. Looking at investing vs saving, both aim to manage capital, but each comes with its own risks and processes. Investing is taking calculated risks to increase wealth, while saving is using low-risk strategies to maintain access to capital in the future.
In the Netherlands, saving is done to preserve capital. People use banks to save their money, and in some cases, it provides them with a small interest. But money saved is only protected by the Dutch Deposit Guarantee Scheme (up to €100,000 per bank).
When saving, people have immediate access to their money. When someone invests, the money is working for them, and withdrawing it early can result in small penalties or even a loss of compounding interest.
While saving is important for building an emergency fund, it’s not always the best strategy for growing wealth.
How inflation impacts capital
To understand the real value of your money, you must first understand inflation. When we compare investing vs saving, the value of money decreases over time. And that is called inflation.
Inflation is the rate at which the general level of prices for goods and services is rising. When inflation is high, every euro you own buys a smaller percentage of a good or service.
In the Netherlands, inflation is the “silent tax” on capital. If your wealth isn’t growing at a rate equal to or higher than inflation, you are effectively losing money. For example, if the inflation rate in the Netherlands is 3.5% and your savings account yields 1.5%, your real rate of return is negative (-2%). But if you are investing at 8% and inflation is 3.5%, you are winning.
Ways people save money
In the Netherlands, people primarily save using digital products and banks. Since cash is no longer as common as it once was, many people hold their money in accounts that earn no interest.
Using high-yield accounts means savers are often only breaking even, as the interest barely covers inflation. However, the upside is that they maintain immediate access to capital if needed. Fixed-term deposit accounts are another way to save, locking money away for 1 to 5 years in exchange for a higher interest rate. The downside is that these longer deposits offer no immediate liquidity. Modern banking apps now offer automated tools that help users segregate funds into specific digital “pots” for goals like holidays or taxes.
How much do Dutch people save on average
The Netherlands has a robust savings culture. Recent data indicate that Dutch households hold over €600 billion in savings. Despite economic fluctuations, the average savings rate remains high compared to other EU nations, often exceeding 10% of disposable income. A desire for financial security drives this accumulation, but it also highlights a massive amount of capital sitting on the sidelines, potentially losing value to inflation.
How is inflation affecting savings
Inflation is affecting people’s savings since their purchasing power often decreases. At best, they are breaking even if they are using a high-yield savings account. Simply keeping money in an account without any interest means capital isn’t used to its full potential.
When inflation is high, banks pay a lower interest rate than inflation. In that case, people are barely breaking even. Similarly, with rising energy and food prices, households may be forced to dip into savings to cover daily expenses, depleting the buffer they worked to build.
Inflation is a key factor to consider when deciding between saving vs investing, as it helps people in the Netherlands better manage their finances and capital overall.
How to protect savings against inflation
To protect savings against inflation without unnecessary risk, people must change how they view money. One way to do it is to set a budget, but we covered this in a different article about budgeting in 2026.
While keeping a financial buffer is needed and advisable, it shouldn’t be overdone. Instead, when looking at saving vs investing, excess capital should be used to avoid losing its value in the long term.
A simple way to do it is to acquire different assets. We’re not saying to spend all the money you have, but we are saying to consider assets that increase in value over time (gold, silver, and even real estate).
Real estate in the Netherlands is a strong asset class. But for many, it’s difficult to access since it requires a loan and more money than intended.
The best way to combat inflation is to pursue returns that exceed its rate. This involves shifting funds from savings accounts into investments like stocks, bonds, or cryptocurrencies.
For people who don’t know how to invest, Yieldfund, a quantitative trading company, offers investment plans with up to 48% interest and weekly payouts. People don’t need to know how to trade as the company is doing it on their behalf.
Is investing in savings accounts beating inflation
No, if you only use savings accounts, you aren’t beating inflation. In fact, people are only breaking even, and in some cases, that’s not even the case. While some banks offer better interest rates, the general rule is that savings accounts pay between 1% and 2.5% interest.
Relying solely on savings accounts means your money will lose value over time. If you want to invest and beat inflation, you need to understand how markets work, conduct thorough research, and learn to manage risk. To invest effectively, you must accept a calculated level of risk and budget accordingly.
Final words
The debate of saving vs investing in the Netherlands comes down to the objective and the amount of money one has. A small buffer is always needed – and can be set in a savings account to break even on inflation. But if your goal is to keep working and continue saving, all that extra capital needs to be invested to beat inflation and transition from a saver to an investor.
By understanding the mechanics of inflation and leveraging diverse asset classes, European investors can ensure their capital works as hard as they do.
FAQ
What is inflation, and how does it affect my savings?
Inflation is the rate at which the prices of goods and services increase over time. It reduces people’s purchasing power and affects their savings every year.
Why can inflation discourage saving?
High inflation can make saving seem pointless, as the money you save today will have less purchasing power in the future.
How can I save money effectively during inflation in the Netherlands?
Limit your savings to an emergency fund covering 3-6 months of expenses. Allocate any remaining capital to investments with higher long-term returns.
