Investment Basics

Investing is the way to go if you need to put it away for future use. The first rule is to figure out what you are saving for. Some people save for their kids' college fund while others save for retirement. After determine what your goal is, you can decide on an investment strategy.

For instance, the Standard and Poor 500 index has a historical average of 10% return. To get an idea of how much one can earn, imagine you put $2,000 into the market, after 30 years, your stocks will be worth more than $50,000.

Another example is if you invest $1,000 a year when you are young in a market that has an average return of 10%, you will reach $1 million within 47 years.

Short-Term Savings Options

Savings account: Typically the first banking account consumers use, savings accounts earn a small amount in interest (anywhere from 0.1% to 4.0%, often under 1% with the low interest rates), making the savings account not too attractive if you are looking to earn money off interest.
Money market funds: Money market funds are a specialized type of mutual fund that invests in very short-term bonds. These funds tend to pay more than the regular savings account but not as much as in a certificate of deposit account. Keep in mind that these accounts are not FDIC insured, meaning they are not guaranteed to be worth the whatever you put in, but they are designed to be worth $1 per share at all time. Unless the stock market crashes horribly, you have nothing to worry about if you are interested in investing in money market funds.
Certificate of deposit (CD): This is a type of deposit that you make at a financial instituation where you promise to leave the money with that instituation for a fixed period of time.