UNDERSTANDING SAVINGS, MONEY, MARKET ACCOUNTS,AND CDS

You can choose to be either a financial tortoise or a financial
hare. As a financial hare, you can race ahead, spending everything
you earn now and have nothing later. Or, as the financial
tortoise, you can pace yourself and spend responsibly,
knowing that by spending a little less today, you can spend
a lot more tomorrow. Assuming that you choose to be a
financial tortoise, slowly and steadily socking away savings,
where are you going to put those first dollars that you’ve set
aside?

This chapter is about vehicles (investment options) that are
appropriate for money that you don’t want to put at great
risk — for example, money that you have earmarked for
emergency funds, or money that you’re saving to buy a car,
furniture, or a home within the next few years. By keeping
your short-term money somewhere safe and convenient, you
can feel comfortable putting your long-term money at somewhat
greater risk.

Although they may not be the most exciting investments
you’ll ever make, savings accounts, money market accounts,
and certificates of deposit (CDs) are worthwhile considerations
for people who are just starting out. Everyone should
have some money in stable, safe investment vehicles. Savings
accounts, money market accounts, and CDs are all basic savings
tools and are the first step on your path to investing.
These tools can help you build up the money that you need
in order to start investing in other ways.

As you learn about investment vehicles through this book,
you find out which ones are good for short-term investments
and which ones are best to go with for the long haul. How
you invest your money depends largely on two factors: how
long the money can remain out of your reach (time), and
how much of it you can afford to lose (risk). Some investments
are a lot riskier than others.

I also discuss what you need to know before you throw your hardearned
dollars into the pot.