Saving Money, Investing, And Investing

947 Words Feb 19th, 2016 4 Pages
The terms saving and investing are often erroneously used by average people to describe the activity of building financial wealth. Knowing the variances between saving and investing, combined with the knowledge of how and when to use each one, is essential to prudent financial planning and for reaching specific financial goals and objectives ("Saving and Investing," 2016). Thus, saving money is a rather passive and safe action, while investing money involves a certain amount of risk; hence, there is a tradeoff between saving and investing, as investing affords the opportunity for increased financial growth ("SEC Questions," 2007). Saving money characteristically involves placing funds in secure places, in particular, bank savings accounts, money markets, and certificates of deposit ("SEC Questions," 2007), therefore, while saving, the overall financial objective is maintaining the security and liquidity of money, as well as preserving money’s initial nominal value ("Saving and Investing," 2016).
Saving money, like investing, requires planning and well-defined financial goals (Kappor, Dlabay, & Hughes, 2012). Typically, an individual who begins saving knows what is owed and is also willing to make lifestyle changes to facilitate the commencement of saving, hence, the initiation of saving involves the elimination of high-interest debt and the reduction of needless expenses (Kappor et al., 2012). Savings is the amount of money left over after paying monthly expenses, and…
Open Document