Difference Between Saving and Investing
Requirement 4a of the Personal Management Merit Badge has us taking a look at the difference between savings and investing money.
What is Saving Money?
Saving is setting aside money you don’t spend now for emergencies or for a future purchase. Usually within a savings account at your bank or credit union.
Your money is available for you to withdraw whenever you need it. (Some banks have limitations on the amount of transactions allowed per month.)
Your interest rate with your bank is usually low and does not keep up with inflation. Savings account interest rates are typically higher than your checking account would offer.
What is Investing Money?
Investing is buying assets such as stocks, bonds, mutual funds or real estate with the expectation that your investment will make you money.
It is a little harder to withdraw the money associated with investing as you will typically need to sell the asset. Some investments like real estate may be giving you a monthly inflow of cash if that property is set up as a rental.
There is risk associated with investing. Sometimes investments go bad and you end up losing or taking a loss on the sale of the asset.
Video from our online merit badge series during the summer of 2019.