What’s the difference between saving and investing?
With a savings account, your money is generally safe and insured to certain limits. Savings accounts typically provide easy access to your money and are perfect for things you need in the near term, like emergencies and short-term goals. Over time, though, you’re fighting a costly battle against inflation, potentially resulting in your buying power being substantially reduced.
When preparing for a long-term goal, like retirement, investing is probably the way to go. When you invest, you put money into securities – like stocks and bonds – that carry risk, with the goal of increasing your principal over time. When you invest in these securities, you’re not sure you won’t lose money because the prices of the securities fluctuate, especially in the short term.
In return for taking that risk, investments can offer the potential for growth that outpaces inflation over the long term. If you’re going to get ahead for retirement, investing may be an effective way to do it.