It's important to know what you want to accomplish with your investments before you actually invest. For example, you might want to purchase a home, fund a child's college education or build an adequate retirement nest egg. If you set financial goals at the outset—you are more likely to reach them.

Savings

People save and invest to have enough money at some point in the future to pay for the things they want or need. Stated most simply, saving is the act of putting aside for another day some of the money you earn or receive as gifts, while investing is what you do with those dollars, including choosing products and strategies to make money grow or to preserve the assets you’ve accumulated.

If you have specific financial goals that will cost money—such as purchasing a car or a home, paying for college or building a secure retirement—accumulating assets and building wealth through saving and investing are the keys to achieving those goals.

There are various ways to save. One way is to open one or more deposit accounts in a bank or credit union. Deposit accounts give you ready access to your money, and your account balances are typically insured by the federal government.

Another way to save is to purchase U.S. savings bonds either through an online account with Treasury Direct (www.treasurydirect.gov), at a bank, or sometimes through a program where you work. Savings bonds are backed by the federal government, so your money is safe.

Seeking Growth Through Investing

If you are willing to take a certain amount of risk with the money you have saved, you can use it to make investments that you expect to be worth more in the future or to pay you regular income overtime at a rate higher than you usually can earn on a bank account—or both.

Two of the key ways in which investments differ from savings accounts are:

(1) investments are not insured by the federal government and can lose value; and

(2) investment earnings are not guaranteed. If you choose your investments carefully and if the financial markets perform in your favor, your return—or what you get back on the amount you invest—can be higher, sometimes much higher, than you could earn on an insured savings account. Likewise, riskier investments could result in partial or in some cases total loss of the principal investment.