Investing has the potential to generate much higher returns than savings accounts, but that benefit comes with risk, especially over shorter time frames. If you are saving up for a short-term goal and will need to withdraw the funds in the near future, you’re probably better off parking the money in a savings account.
Savings accounts are a safe place to store your money and earn interest. They are FDIC-insured up to $250,000 per depositor per account type. Savings accounts are ideal for short-term goals like building an emergency fund or saving for a down payment on a house.
If you have a long time until you need to meet your goal, investing gives your money the potential to grow faster than it could in a savings account. Your returns will compound over time which means in addition to a higher rate of return on investments, your investment earnings will also earn money over time.
However, investing comes with risk. The stock market can be volatile and unpredictable. If you invest in individual stocks or bonds, you run the risk of losing money if the company goes bankrupt or defaults on its debt.
In summary, if you have a short-term goal and will need to withdraw the funds in the near future, you’re probably better off parking the money in a savings account. If you have a long time until you need to meet your goal and can tolerate some risk, investing gives your money the potential to grow faster than it could in a savings account .
