Compare some of the differences between saving and investing.
Savings vs. investing
|Short-term: Ready to go
Saving is typically for smaller, shorter-term goals in the near future (usually three years or less) like going on vacation or having money for an emergency.
|Long-term: Achieve major goals
Investing can help you reach bigger long-term goals (at least four to five years away), like saving for a child’s college education.
|Ready access to cash
A savings account gives you access to ready cash when you need it. But many savings accounts do limit how often you can take your money out. Ask at your bank.
|Harder to access cash
When you invest your money, it’s typically not as easy to get your hands on it quickly as compared to a savings account.
If your money is in an FDIC-insured savings account, it’s at minimal or no risk, because your funds are insured by the Federal Deposit Insurance Corporation (FDIC). That means that if anything ever happened to the bank, the FDIC insures each person’s money to at least $250,000.
|Always involves risk
You may lose some or all of the money you invest.
You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than investments.
|Potential for profit
Investments have the potential for higher return than a regular savings account. Your investments may appreciate (go up in value) over time. This increases your net worth, which is the value of your assets (what you own) minus your liabilities (what you owe). If you sell for higher price than you invested initially, you make a profit.
Note: Remember: the greater the risk of an investment, the higher potential return or loss of your money.
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