Many people struggle to decide whether to save or invest their money, and your income level plays a crucial role in determining the right approach. A lower income might require prioritising savings for financial security, while higher earners may focus more on investment opportunities in Malaysia. This guide will help you understand when to save and when to invest, depending on your income bracket, so you can make the most of your money.

Understanding the Difference Between Saving and Investing

Before deciding where your money should go, it’s important to understand how saving and investing differ.
 

• Saving: This involves keeping money in a savings account or fixed deposit for security and easy access. It is low-risk and ensures liquidity, but the trade-off is lower returns.
• Investing: This involves putting money into unit trusts, stocks, bonds, or real estate to generate long-term growth. While investments generally provide higher returns, they come with higher risk and less liquidity.

Key Differences Between Saving and Investing:

Understanding these differences will help you balance both approaches based on your financial situation.

If You Earn An Average of ≤ RM3,401/month: Prioritise Savings First

• Build an Emergency Fund: Aim to save 3 - 6 months’ worth of expenses to cover unexpected financial emergencies.
• Use a High-Interest Savings Account: This allows your savings to generate passive income while remaining secure.
• Automate Monthly Savings: Setting up automatic transfers helps build consistency and discipline.
• Avoid Risky Investments: Investments with high volatility should be avoided until financial stability is achieved.
   

Once you have an emergency fund and extra disposable income, consider low-risk investments such as unit trusts or government bonds. These options provide modest, stable returns while keeping risk minimal.

If You Earn An Average of ≤ RM3,401 - RM7,971/month: Balance Savings and Investments

For those in this bracket, financial stability is the first goal, followed by a gradual transition into investments.
 

• Follow the 50/30/20 Rule: Allocate 50% to needs, 30% to wants, and 20% of your income toward savings and investments.
• Ensure Emergency Savings Are Secured: Before investing, make sure your emergency fund is complete.
• Start Investing in Unit Trusts & Exchange-Traded Funds (ETFs): These provide diversification and professional fund management.
• Top Up EPF & PRS Contributions: These options offer long-term growth and tax relief.
   

Once you have a financial safety net, aim to allocate 50% of your savings fund into investments over time. Start with small contributions and gradually increase them as your income grows.

If You Earn ≥ RM8,000/month: Grow Wealth Through Smart Investments

If you earn above RM8,000 per month, you have more flexibility to grow your wealth while maintaining financial security.
 

• Maintain a Strong Savings Safety Net: Even with a higher income, ensure you have liquid savings for unforeseen expenses.
• Diversify Investments: Consider stocks, property, Real Estate Investment Trusts (REITs), and index funds to spread risk and maximise returns.
• Explore Higher-Risk, High-Return Opportunities: Once financial security is established, higher-risk investments may offer greater returns.
• Maximise Tax-Efficient Savings: Take advantage of Hong Leong Bank fixed deposits, EPF contributions, and PRS funds to optimise savings and tax reliefs.

Key Takeaways for All Income Levels

(Source for Income Level: iMoney)

Conclusion

Deciding whether to save or invest depends largely on your income level and financial goals. When you have just entered the workforce, focus on savings first. After establishing a strong foundation, you can incorporate investments for long-term financial growth. A balanced strategy ensures both short-term security and long-term wealth building.
 

Explore Hong Leong Bank’s savings accounts and investment solutions to start managing your money wisely and growing your financial future.