A commonly asked question when someone starts planning their finances is: which should come first—saving or investing?

Although these two financial activities are often seen as similar, they actually serve different purposes and offer distinct benefits.

According to Indonesia’s Financial Services Authority (OJK), saving refers to setting aside money in a secure place—usually in a bank—for short-term needs or emergencies.

In contrast, investing involves allocating money into instruments that have the potential for higher returns, though they also carry inherent risks.

Melvin Mumpuni, a financial planner at Finansialku, emphasized that saving should be the foundational step before considering investments.

“Before thinking about investing, make sure you have an emergency fund saved in either a bank account or another liquid financial instrument,” he said, as reported by Kompas.com.

An emergency fund is essential to avoid disrupting your investments when unexpected situations arise—like job loss or illness. The standard recommendation is to have savings equivalent to 3 to 6 months of monthly expenses.

Investing: Beating Inflation and Achieving Financial Goals

Once an emergency fund is in place, investing becomes the next logical step. This is particularly relevant because Indonesia’s average inflation rate over the past five years has ranged between 2.5% and 3% annually.

If you rely solely on regular savings accounts that yield interest of only about 0.5% to 1% per year (according to LPS data in 2025), the real value of your money will gradually decline due to inflation.

There are various types of investment instruments available, including mutual funds, stocks, bonds, and gold. Each option carries its own level of risk and return potential, and should be chosen based on your risk tolerance and specific financial goals.

So Which Comes First—Saving or Investing?

According to OJK’s guidelines, a sound financial management strategy follows this order of priorities:

1. Fulfill essential daily living needs

2. Build an emergency fund by saving

3. Then allocate funds for investing

This means that saving should be the initial step to establish a strong financial base. Once that foundation is secure, investing can be pursued to grow your wealth.

Such a strategy ensures that even if your investments experience losses, you still have a financial cushion to fall back on.

In essence, the question isn’t about which is more important, but about when each action should be taken. Saving protects you from life’s uncertainties, while investing helps your money grow toward achieving long-term financial aspirations.

As financial expert Ramit Sethi aptly wrote in his book I Will Teach You to Be Rich:
“Think of saving as protecting your today, and investing as securing your tomorrow.”

With thoughtful planning, saving and investing can work hand in hand to create a more stable and prosperous financial future.