Saving Versus Investing
I should think about the money I'm save as falling into three categories: money for an emergency fund, money for short-term purchases, and money for long-term goals. Money for an emergency fund and short-term purchases should be kept in an easily accessible savings or money market account. I may also consider keeping this money in a Certificate of Deposit (CD), which may earn more interest than a savings or money market account. With CDs, you're required to leave the money there for a certain period of time; with money market deposit accounts, I'm typically must maintain a high minimum balance. Money for long-term goals can be invested in assets such as stocks, bonds, or mutual funds. These assets possess more risk than traditional saving vehicles, but they have the potential to earn more. For more information on investing, see Invest Money to Reach My Goals.