I’m Benny the Bear and now that you understand why you should save money and how, let’s take it a step further with investing your money. When you invest you are getting your money to work for you by putting it into a special account, like a bond or stock, that has the chance of earning you more money. The money you choose to invest is not needed for your daily spending or immediate savings. This money is a long-term investment for many different reasons, like retiring from work. Before you choose to invest, you must think about its safety, liquidity, and return on the investment.

Safety

When it comes to investing, some products are riskier than others. The risk of an investment product is based on how much of your money is protected from being lost. There is a chance that you will lose some money if your investment is extremely risky. For example, opening your savings account at the credit union is an investment. It is low risk because your money is protected by the government. When opening an investment product, remember to think about how much risk of losing money that you are willing to take on.  

Liquidity

Think of money like water. What you have in your pocket to spend is like the glass of water on the table that you can drink anytime you want. The money you save in your account at the credit union is like a bottle of water in the fridge. It’s not as convenient, so you may have to put some effort in to getting it. But it’s there ready to use if you need it, and you are less likely to “spill” it (spend it).

And then there are Share Certificates (CDs). They are like ice. You can earn more money with a Certificate, but you will have to wait a long time before you can use the money again because its “frozen.” You get to pick how long to leave it to “freeze,” and usually the longer you leave it, the more you will earn in dividends. If you take your money out early, though, you may have to pay penalties, so you want to be sure you won’t need the money before the time is up. This same idea can apply to other types of investments too, so make sure you have a pretty good idea of how much time you have before you will need the money when you are deciding where to invest it. 

Return on Investment

Your main goal of investing is to get more money than you could if you just kept it in a jar. When you invest, the money you earn off the investment is considered your return and is how your money is working for you. When looking at different investment opportunities, you need to look at how much money you can make.

The only problem is that the more risk you take with your money the more return potential there is in your investment, so you have to decide how much safety you are willing to give up in order to potentially get more money from it.

For example, I put money into baseball cards which are items you buy that will hopefully grow in value over the time that you have them. If the baseball player on the card does well in the league, I can sell the baseball card for a lot of money and have a great return on my investment. On the other hand, if the baseball player gets hurt and can’t play anymore, the card may have no value, which is the risk you take when you buy the card. As you think about your return options, think about all the different options with all the different levels of return you have available to you.    

As you decide what you are looking for in an investment, remember that you can have more than one investment product. A good practice when investing is to make sure all your money is not in one pot, so try to spread out your investments with different levels of risk, liquidity, and return. Ask your parents about their investments and why they chose those products!