Taking Stock

• What are Stocks?
• So, You Want to Start Investing?
• Methods of Investing
• Investigate the Market
• Credit Card Smartz
• What is the Dow?
• Investing and Saving - what's the difference?
• What are Bonds?

Investing & Saving... What's the Deal?

Let's start with some quotes from our buddy and yours, Webster (the dictionary guy, not the short one):

Investing: To commit (money or capital) in order to gain profit or interest, as by purchasing property, securities or bonds. To spend or utilize (time, money, or effort) for future advantage or benefit.

Saving: To keep for future use or enjoyment. To avoid wasting, losing or spending something; to accumulate something.

We'd like to give you a few simpler explanations (we did these ourselves):

Investing: To take some money you have right now and make it work for you. Then, in the future, you should have its benefits to help finance more investments like cars and homes. 

Saving: To take something you have and put it in a safe place to have the exact same amount in the future. Sort of like putting your money in a sock drawer. 

Sure, that makes sense, you say. But is that everything? Definitely not. Strict definitions can't explain the differences. People usually talk about saving for particular things, like college, a car, or a computer. When you "save," though, your money doesn't have a chance to grow. Huh? Your mom is probably always telling you that money doesn't just grow on trees, but that's basically what happens when you invest. Saving can actually decrease the value of your money. You always hear Grandpa telling you about the price of bread when he was a boy, right? Well, guess what'll happen when you're Grandpa. The value of a dollar goes down over the years, meaning that $1,000 in your savings account won't be worth as much in 20 years as it is now. 

So let's talk about investing. Most people think of "investing" as being the same thing as working with stocks or the stock market, but there are many other -- more secure -- ways to invest your hard-earned cash. How? Things called equities and mutual funds, which can actually help your money earn even more money. They do have some risk that goes along with them, though, so it's important to be aware of what's best for you. 

An important bit of knowledge is that risk and return (the profit you receive) go hand-in-hand. If you want to invest in something with a really low amount of risk, your return won't be anywhere near as high. While the return on another stock may be really high, you might also have a greater chance of losing your money altogether, which is risk. Your savings account would be the first kind, while any stock or mutual fund investing you do would be the second kind.

What's one of the safest ways to both save your money and invest it? Savings bonds. Yep, those things Grandpa gave your mom when you were born that she says you can't have until you're 21. That's for good reason, too. If you bought a $25 savings bond when you turned 14, your bond's return amount will be a lot bigger than that $25 you initially invested. 

As always, it's important to do your research about the different types of savings accounts and investment options that are out there.