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We all try to save money, whether we're skipping a Friday night out or tossing our spare change
into an old coffee can.
But not all of us are investing that money -- even if it's earning interest in a savings
account.
What's the difference between saving and investing?
Savings typically consist of money that you might need quickly. Did your car break down?
Do you need to buy a washing machine? That's money that should come from your savings.
Many people keep their savings in a bank account. Even if you're earning a little interest on
that money, it's still considered savings.
For some savings accounts, such as some online savings accounts, it may take a couple of
days to withdraw cash, but for others, you'll be able to access your money right away.
With a typical savings account, your balance won't be affected by the ups and downs of
the stock market.
Investments typically consist of money that you shouldn't need to access right away.
Because that money isn't needed right now, you might invest in something potentially
riskier, like a mutual fund.
You could make money, but you could lose money as well—so if you might need it soon, it's
usually best to save it, not invest it.
What do people invest in? Many of us invest in our retirement accounts. Some of us invest
money in a child's college fund. Some of us decide to buy a house, hoping that later on,
it'll be worth more than what we paid for it.
It's often harder to tap the money that we've put into investments. There may be taxes or
penalties for withdrawing money from our retirement accounts and kids' college funds before it's
time. And selling a house can take months or even years.
That's why any cash you need in the next few months or years -- for car repairs, medical
bills, or to cover your costs in case you lose your job -- should be kept as savings.
Only invest money that you won't need any time soon and that you can afford to risk.
You should consider the investment objectives, risks, charges and expenses carefully before
investing. Please call 877-518-9161 or log on to www.tiaa-cref.org for underlying product
and fund prospectuses that contain this and other information. Please read the prospectuses
carefully before investing.