Even though the words "saving" and "investing" are often used interchangeably, there are differences between the two.
Saving provides funds for emergencies and for making specific purchases in the relatively near future (usually three years or less). Safety of the principal and liquidity of the funds (ease of converting to cash) are important aspects of savings dollars. Because of these characteristics, savings dollars generally yield a low rate of return and do not maintain purchasing power.
Investing, on the other hand, focuses on increasing net worth and achieving long-term financial goals. Investing involves risk (of loss of principal) and is to be considered only after you have adequate savings.
| Savings vs | Investment Dollars |
|---|---|
| Savings $$ | Investment $$ |
| Safe | Involve risk |
| Easily accessible | Volatile in short time periods |
| Low return | Offer potential appreciation |
| Used for short-term goals | For mid- & long-term goals |
More Articles
- Asset Allocation
- Diversification
- Dollar-Cost Averaging
- Emergency Cash Reserve
- Fact Sheet Explains Options for Saving for College
- How Time Affects The Value Of Money
- Investing Action Steps
- Investing for Your Future
- Investment Return
- Saving for Children’s College Education
- Saving for Post Secondary Education
- The Risk / Rate-Of-Return Relationship
- The Time-Value of Money
- Time and Skill to Manage Your Portfolio
- Your Investment Goals
- Your Risk Tolerance
- Your Tax Situation
- Your Time Horizon
