The Center For Debt Management
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Get The Facts On
Saving and Investing

Making Money Grow

The Two Ways to Make Money

There are basically two ways to make money.

1. You work for money.

Someone pays you to work for them or you have your own business.

2. Your money works for you.

You take your money and you save or invest it.

Your money can work for you in two ways:

Your money earns money. When your money goes to work, it may earn a steady paycheck. Someone pays you to use your money for a period of time. When you get your money back, you get it back plus "interest." Or, if you buy stock in a company that pays "dividends," the company may pay you a portion of its earnings on a regular basis. Your money can make an "income," just like you. You can make more money when you and your money work.

You buy something with your money that could increase in value. You become an owner of something that you hope increases in value over time. When you need your money back, you sell it, hoping someone else will pay you more for it. For instance, you buy a piece of land thinking it will increase in value as more businesses or people move into your town. You expect to sell the land in five, ten, or twenty years when someone will buy it from you for a lot more money than you paid.

And sometimes, your money can do both at the same time—earn a steady paycheck and increase in value.

Products that earn interest:

  • Savings accounts
  • Some checking accounts
  • Bonds

Products that increases or decreases in value:

  • Stocks
  • Mutual funds
  • Bonds, if you sell them before they are due

Products that could do both:

  • Stocks that earn dividends
  • Mutual funds

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