Welcome to your investment journey! Today we're starting with a simple but powerful question: what's the difference between saving and investing?
Most people save money in bank accounts, but investing means putting money into assets that can grow over time.
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In one sentence, how would you explain the difference between saving and investing?
Here's the key difference: saving keeps your money safe but barely grows it. Bank savings accounts typically pay around 1-2% per year.
Investing involves more risk, but historically stocks have averaged about 7-10% annual returns over long periods.
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Why does that difference matters over many years?
Let's look at a simple example. If you put $1,000 in a savings account at 1% interest, after 10 years you'd have about $1,105.
That same $1,000 invested in stocks averaging 8% would grow to about $2,159 in 10 years!
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Which option gives you $2,159 after 10 years: the savings account or stocks?
This growth happens because of compound interest - you earn returns not just on your original money, but also on the returns from previous years.
It's like a snowball rolling downhill, getting bigger and bigger as it picks up more snow.
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Have you ever experienced compound growth in any area of your life?
But here's something important: while your money sits in that 1% savings account, inflation (rising prices) typically runs about 2-3% per year.
This means your money actually loses buying power over time if it's not growing faster than inflation!
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What costs more today than it did 5 years ago?
