Financial Security: Saving and Investing

January 28, 2009 Print Friendly and PDF

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.

time and money

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

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.