Below is an excerpt from the investor education Web site of the SEC.(Appendix)

a. How does the excerpt define the difference between saving and investing?

b. In what ways does this differ from the economist’s definition given in this chapter?

Your “savings” are usually put into the safest places or products that allow you access to your money at any time. Examples include savings accounts, checking accounts, and certificates of deposit. At some banks and savings and loan associations your deposits may be insured by the Federal Deposit Insurance Corporation

(FDIC). But there’s a tradeoff for getting that security and ready availability. Your money is paid a low wage as it works for you.

When you “invest,” you have a greater chance of losing your money than when you “save.” Unlike FDIC-insured deposits, the money you invest in securities, mutual funds, and other similar investments are not federally insured. You could lose your “principal,” which is the amount you’ve invested. That’s true even if you purchase your investments through a bank. But when you invest, you also have the opportunity to earn more money than when you save.