Saving and Investing for Students

You buy something with your money that could in-
crease in value. You become an owner of something that you 
hope increases in value over time. When you need your money 
back, you sell it, hoping someone else will pay you more for it. 
For instance, you collect comic books thinking they will increase 
in value over time. You expect to sell them in five, ten, or even 
twenty years when someone will buy them from you for a lot 
more money than you paid.
And sometimes, your money can do both at the same time—
earn a steady paycheck and increase in value.

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U.S. SECURITIES AND EXCHANGE COMMISSION
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11
THE DIFFERENCES BETWEEN SAVING AND INVESTING
Saving
Your “savings” are usually put into the safest places, or prod-
ucts, that allow you access to your money at any time. Sav-
ings products include savings accounts, checking accounts, and 
certificates of deposit. Some deposits in these products may be 
insured by the Federal Deposit Insurance Corporation or the 
National Credit Union Administration. But there’s a tradeoff 
for security and ready availability. Your money is paid a low 
wage as it works for you.
After paying off credit cards or other high interest debt, 
most smart investors put enough money in a savings product to 
cover an emergency, like sudden unemployment. Some make 
sure they have up to six months of their income in savings so 
that they know it will absolutely be there for them when they 
need it.
But how “safe” is a savings account if you leave all of your 
money there for a long time, and the interest it earns doesn’t 
keep up with inflation? What if you save a dollar when it can 
buy a loaf of bread. But years later when you withdraw that 
dollar plus the interest you earned on it, it can only buy half 
a loaf? This is why many people put some of their money in 
savings, but look to investing so they can earn more over long 
periods of time, say three years or longer. 
Investing
When you “invest,” you have a greater chance of losing your 
money than when you “save.” The money you invest in se-
curities, mutual funds, and other similar investments typically 
is not federally insured. You could lose your “principal”—the 
amount you’ve invested. But you also have the opportunity to 
earn more money.

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