Editorial Team

A Dollar Saved isn’t the Same as a Dollar Earned — and a Dollar Saved and Invested is Worth Substantially More

You might have heard the phrase “a dollar saved is a dollar earned.” It’s a helpful framing to encourage people to save more — a worthy ambition to be sure.

But the more you delve into this phrase, the more it exposes some uncomfortable truths about how irrational we can be around money. More often than not, this irrationality comes at our own expense.

Firstly, the amount of effort we expend into earning money is substantially more than we invest in saving it. We submit ourselves to decades of education and training, and work incredibly long hours at jobs we don’t always love and with people we may not like for decades. We sacrifice time with friends and family in order to do well at work and separate ourselves from them by moving to new cities or even countries to pursue career and monetary success.

Secondly, a dollar saved is worth substantially more than a dollar earned. A dollar earned is taxed — heavily — whereas a dollar saved is tax free. For anyone in a high tax bracket, that means a dollar saved is worth 2x more than a dollar earned. A substantial difference.

The Mistakes That Make Saving Hard

So, we are spending an enormous amount of time and energy and sacrificing a formidable amount to earn money, but most of us spend very little time at all on saving money, despite its relative value, especially when compared to the effort exerted. In our post The 3 Sins of Personal Finance, we outlined 3 pernicious behaviors that almost everyone in the mass affluent segment commits with their money and the way it costs them dearly. These are:

  1. Keeping too much cash in a Big Brand Bank deposit account earning little or no interest
  2. Not maximizing your returns from credit card spend 
  3. Not dollar-cost averaging

The first two are about saving money or maximizing your returns from your own money; the last is putting that money to good use. 

Cash and credit card miles/points are possibly the worst performing financial assets you own. Investing that value, whilst not risk free, can offer a low-risk way to ensure that inflation and depreciation do not impact your wealth. It’s always advisable to keep a cash cushion for emergencies but otherwise long-term investing has delivered on average around 10% returns (with significant year by year fluctuations) over the last 40 odd years. 

So, if a dollar saved is worth as much as twice a dollar owned, a dollar invested — at least over the long term — is potentially worth substantially more still.

Investing's Worth Substantially More

A model Unifimoney customer could effortlessly create an investment pot over their working life of $460K based on an average monthly contribution of $120 at 10% over 35 years. The equivalent they would need to earn in a high tax state would be over $900K. 

We are using current historically low interest rates but they are likely to be higher over the period. Here is the breakdown:


What's stopping us from spending a little more time to ensure that we are balancing the effort we spend on earning money with a little more time spent saving and investing it? The biggest problem is the cognitive biases that make managing money really hard for humans.

However, there is hope! Technology does not suffer from the same problems as we do when it comes to managing money. It's really good at doing complex, boring repetitive tasks and will continue to do them with almost zero effort over the long term.

So, if we can bring technology to the problem of saving and investing, we could potentially get all the benefits of a dollar saved and a dollar earned without the effort. This is what we mean by having your money work as hard for you as you do to earn it in the first place.

It may be the difference between working until you are old and an early retirement. It could allow you to pursue your own business or send your kids to the school of your choice. It could create the financial stability to care for your parents, to get that second home somewhere nice, or just to survive that unexpected event.

It's hard to predict the future, but it's not hard to prepare for it whatever it might hold.

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*Important information and disclaimers

The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.