What it is
A nest egg is a huge sum of cash or assets that is convertible to cash. It is typically made up of savings, investments, and high-value property like real estate, vehicles, or even precious jewelry.
This is not the same as your regular savings or emergency funds. Although they’re all stored away to cover expenses, what sets them apart is their purpose.
Savings are usually meant for everyday expenses, while emergency funds are for unexpected (but essential) spending. Most people build a nest egg for retirement so they can relax into their golden years.
Others create a nest egg for their children’s future or to pass down as inheritance.
What it means for you
Wherever you are in your financial journey, it can be helpful to have a strategy around building or managing a nest egg.
If you’re a beginner, you’ll likely focus on growing your money fast enough to reach your target amount. On the other hand, people who have already built a nest egg may prioritize preserving the value of their assets.
If you have decades before you’ll need your nest egg, you may consider adopting a growth strategy. This involves choosing investments with the best potential to grow your money.
Remember to factor in your risk appetite. Investing in assets with better potential rewards also exposes your money to higher risk.
As the time to use your nest egg approaches, it’s ideal to shift your money to more conservative and highly-liquid investments. This way, you can protect your capital and cash out easily once you need to.
