I have heard this question a lot more frequently over the past decade since interest rates on bank accounts crashed from around 5% or 6% per year to now where it’s 0.25%. (They were even 7.25% in August 2008.)
It’s a natural decision to ponder when prices are rising faster than you’re earning interest. (In technical terms inflation is higher than your interest.)
What the markets are doing, or predicted to do, is nowhere near as relevant to this decision as many people assume.
How important is it?
Typically we are saving money in order to spend it on a future goal, or as a contingency for true emergencies.
Whether you should invest your cash savings is first driven by this key consideration:
How important is it to me that I can afford this goal?
To earn higher interest than what your cash bank account offers generally requires taking more risk. Specifically, you have to accept the possibility you make actually earn less interest, and even lose some of your savings.
If losing some of your savings means you won’t then be able to afford the life goal when you want it, then ponder “is the risk worth it to me?”
For less important goals, the possibility of loss may be worth the possibility of earning more interest. For very important goals, certainty may be worth accepting a lower interest rate. Only you can determine that.
How soon do I need the money?
Some very important goals, such as financial independence (or retirement) may be many years away.
With longer time frames, it becomes increasingly important to consider the loss of buying power due to inflation.
Historically, the chance of loss on investments such as shares and property decreases over longer time frames.
Therefore, for goals that are longer than 7 to 10 years way it is worth considering investing some or all of what you’ve saved.
Investment values and returns are volatile and unpredictable. If you want to invest then your emotional tolerance of uncertainty will drive how much of the savings you invest. There’s a mix of science and art to determining that so hire a licensed financial planner to guide you.
Perhaps save more first
If you’re living pay-to-pay or year-to-year (as half of Aussies are) it’s probable you first need to be saving more to cover your medium-term commitments and goals.
Rather than learning about investing a better use of your time and energy would be to implement a budgeting system so you are saving enough.