Saving vs. investing

Compare some differences between saving and investing.

Saving

• 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.

• 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.

• Minimal risk

  If your money is in a savings account, it’s at minimal or no risk.

• Earn interest

  You can earn interest by putting money in a savings account, but savings accounts generally earn a lower return than do investments.

Investing

• Long-term : Achieve major goals

  Investing can help you reach bigger long-term goals (at least four to five years away), like buying a house or retiring.

• 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.

• Always involves risk

  You may lose some or all of the money you invest.

• 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.