Saving and investing are often used interchangeably but they are not the same. Saving is keeping your money in a safe, insured account. Saving is usually reserved for short term goals such as your rainy day fund, emergency fund, saving for household items, or a car you want to buy in the next year or so. The most important things are that the money is safe and accessible and won’t lose value. Just don’t expect much interest or growth since it is low risk. Investing is for longer term goals like retirement, college, or maybe a down payment on a home (if that’s several years in the future). It involves higher risk and the expectation of higher returns. When you’re considering investing, think about what would happen if you lost money: investments can, and do, lose money. Since you are putting your money at risk, it does come with the potential for greater growth (gains) but you must be able to absorb near term ups and downs. Investing for the long term insulates you from the short term ups and downs and lets you concentrate on the long term potential for gains.
This week in our “Next Best Step Series” we talking about investing and what to know when getting started such as the types of accounts you can use, the different kinds of investments, understanding risk, fees and the old adage “don’t put all your eggs in one basket” (also known as diversification.) You can read the full article here.