The difference between saving vs. investing money:
While both options can generate a return, the majority of people do both, as the purpose of investing vs. the purpose of saving can be different.
Saving involves putting money in a savings account where it can grow essentially risk-free at a modest rate. With a savings account, your dollars can grow without being subjected to the ups and downs of the market, and when your financial institution is FDIC-insured, your balance is protected and insured, too (up to $250,000 per depositor for each account ownership category).
People choose savings accounts for several reasons, from savings for a short-term need, like an upcoming car payment, or as part of an emergency fund to cover unforeseen expenses. Some also choose to use their savings account as a nest egg for their future.
Investing requires you to put money into tradable assets, such as stocks and bonds, where it can grow (ideally) for years. Know that it can take time to withdraw funds from an investment, as they’ll need to sell your assets and convert them into cash.
When you set up a long-term investment portfolio, you put your cash in a variety of assets, such as mutual funds, stocks and bonds, which are estimated to grow over time. Most people invest for retirement, but some also invest for their children’s education or a new home. While these types of investments come with the appeal of larger potential gains, they also come with a risk of losing money, too.
As you’re deciding between high-yield savings vs investing, you should think about your financial goals and objectives. Here are some factors to consider when it comes to choosing a savings account vs. investing.
||Weeks to years
||Years to decades
||Yes, often between 0.01% and 2%*
||Almost none, especially on FDIC-insured accounts
||Can be high or low risk, depending on the assets
|Access to cash
||Yes, but not immediate
||Generally, low or no fees
||Can be trading fees/managing fees