Investing is getting your money working for you. Saving is parking your money for a specific purpose. Pay attention to how you refer to your financial vehicles. Are they ‘savings’ or are they investments? Investing has immediate benefits as well as supporting long-term financial independence. Saving will ensure you have adequate cash for a particular expense at some nearer term date such as to save for school, a holiday, car, down payment, shopping trip, etc.

Whenyou are deciding what to do with your money, start by using the terminology that adequately describes your goal. If it is a short-term specific item, your goal will be to maximize the interest on the money you are setting aside. This is very different than putting your money into an investment vehicle where it will produce immediate and ongoing income as well as potentially increase in value. Investments require more due diligence, risk and return analysis, and professional guidance than passive savings.