Saving - Common Questions
The project may not have covered the questions you wanted answered. I'm including the most common ones below, and I'll try to keep adding to the list as questions come in.
You can submit questions here.
Questions
- What's the difference between saving and investing?
It's murky. One distinction I usually make is that savings sits around and investing grows. As you save money, you...save(?)...some of it, and invest the rest. A savings account, however, is a very specific type of account. The bank takes the money you save here and lends it out to other people for interest. You get some of that interest. An investment account, such as your 401K, IRA, or brokerage account, is one that you can use to buy all sorts of things like stocks and bonds and mutual funds. You can't do that with a savings account. The bank gets to choose what to do with the money in a savings account.
Theretically, there's no difference between saving and investing; you are choosing how to spend your money, and there's a certain rate of return that comes from the different ways you spend it.
You want a higher rate of return compared to the risk of losing money. If you put the money in a savings account, your rate of return is around 0.1%, but your money is safer. If you put the money in the stock market, your rate of return averages about 6-8%, but you're more likely to lose money in the short-term. If you spend that money on rent, your rate of return is -100%, guaranteed, because you lose all of it (but you do get a roof over your head).
I know, I know. It's not the best answer. Don't blame me, blame the fact that people use these words differently all over the country.