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Dividend Income vs. Interest Income

Both pay you cash, but they function very differently. Understanding the distinction is key to tax planning and risk management.

Interest Income (Savings / Bonds)

When you put money in a bank or buy a bond, you are a lender. The bank pays you interest for using your money.

  • Pros: Very safe (FDIC insured), predictable.
  • Cons: No growth (your principal doesn't increase), inflation eats returns.

Dividend Income (Stocks)

When you buy dividend stocks, you are an owner. The company shares its profits with you.

  • Pros: Potential for capital appreciation (stock price goes up) AND income growth (dividends rise).
  • Cons: Volatile prices, risk of dividend cuts.

The Verdict

For short-term goals (1-3 years), stick to interest. For long-term wealth (5+ years), dividends usually win.

Check Your Potential Dividend Income

See how much monthly income your savings could generate if invested in dividends.

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DISCLAIMER: Investments in stocks can lose value.