Should you save first or borrow to invest? Guide to growing your wealth fast

Dubai: One of the biggest financial dilemmas people face is whether to save money first or jump straight into investing. Should you risk more for potentially bigger returns or play it safe? And what about borrowing money to invest—does that ever make sense?

The truth is, both saving and investing have their benefits, but knowing when to choose one over the other is crucial to building wealth. Let’s break it down in a way that’s simple, relatable, and practical.

Case for saving first

Saving is the safer route. The money in your bank account won’t suddenly decrease unless you withdraw it. However, the downside is that savings accounts offer minimal interest, often lower than the rate of inflation. This means the value of your money can shrink over time.

If you have short-term financial goals, like buying a car, funding a vacation, or building an emergency fund, saving is the better option. Since market fluctuations won’t affect your savings, you can count on having the exact amount when you need it.

Why investing can be more lucrative

Investing allows your money to grow faster than it would in a savings account. Through compounding returns, your money earns money over time. For long-term goals like retirement, investing can be the smarter strategy because, historically, investments in stocks and funds yield much higher returns than savings accounts.

However, investing comes with risks. If the market dips at the wrong time—like when you need your money—you could lose a significant portion of your investment. That’s why investing is best suited for goals that can be adjusted if necessary.

Verdict: Should you save first or borrow to invest?

The answer depends on your goals and timeframe:

Using borrowed money to invest—also called leveraging—can accelerate wealth-building, but it’s risky. If your investment performs well, you can make a profit after paying off the loan. But if the market drops, you could end up losing more than your initial investment.

Key considerations when borrowing to invest:

Final thought: The best approach is balance

For most people, a mix of saving and investing is ideal. Start by saving a financial cushion (at least 3–6 months’ worth of expenses), then gradually begin investing for higher returns. That way, you get the best of both worlds—security and growth.