Nest Egg


DEFINITION of 'Nest Egg'

A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for longer-term objectives, the most common being retirement, buying a home and education. It can also refer to money kept aside as a reserve to deal with unexpected emergencies such as a medical problem or urgent housing repairs. “Nest egg” has been used to refer to savings since the late 17th century. The term is believed to have been derived from poultry farmers’ tactic of placing eggs – both real and fake – in hens’ nests to induce them to lay more eggs, which meant more income for these farmers.


The foremost investment objective of a nest egg is generally preserving capital, since it represents funds that have been accumulated over a considerable time. However, the portfolio should also have a growth component to offset the effects of inflation over time. A nest egg should typically be invested in relatively conservative instruments such as certificates of deposit, bonds and dividend-paying blue chips. The exact allocation of these securities within a nest egg should be based on asset allocation principles as well as the investor’s risk tolerance and comfort level.

It would be folly to invest nest egg proceeds in certain volatile investments in hopes of achieving a high rate of return. These investments include commodities, small-cap stocks and currencies, since their inherent volatility makes them less suited for conservative investing.

  1. Coverdell Education Savings Account ...

    A tax-deferred trust account created by the U.S. government to ...
  2. Golden Boot

    An inducement or incentive for an older worker to "voluntarily" ...
  3. 529 Plan

    A plan that allows for the prepayment of qualified higher education ...
  4. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  5. Mom And Pop

    A colloquial term for a small, independent, family-owned business. ...
  6. Education IRA

    A savings plan for higher education. Parents and guardians are ...
Related Articles
  1. Savings

    10 Tips For Achieving Financial Security

    Follow this sound advice and plan for a comfortable future.
  2. Budgeting

    Financial Solutions For Young Women

    Break through the stereotypes and find out how to manage your life to meet your needs.
  3. Retirement

    5 Retirement-Wrecking Moves

    These common mistakes can sabotage your nest egg and your plans for retiring.
  4. Retirement

    Bursting Boomers' Inheritance Dreams

    Waiting for a big payload from an aging relative? The chance of cashing in is lower than you think.
  5. Retirement

    Helping Your Clients Face The Financial Reality Of Retirement

    Altering retirement plans is tough, but when the retiree is unprepared, it's very necessary.
  6. Savings

    5 Ways To Lose Your Retirement Nest Egg

    These common mistakes can put your savings at risk. Find out how to avoid them.
  7. Options & Futures

    Need Retirement Income? Sell Your House!

    Discover 10 tips for making a quick sale and a healthy profit.
  8. Budgeting

    8 Reasons To Never Borrow From Your 401(k)

    Find out why dipping into your future savings can have serious consequences.
  9. Retirement

    Boomers: Twisting The Retirement Mindset

    This generation must take a whole new approach to post-work planning.
  10. Retirement

    6 Ways To Maximize The Value Of Your 401(k)

    From matching employer contributions to proper asset allocation, we'll tell you how to get the most out of your plan.
  1. Can mutual funds outperform savings accounts?

    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
  2. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
  3. How soon should I start saving for retirement?

    The best answer to the question, "How soon should I start saving for retirement?", is probably, "yesterday," and the second ... Read Full Answer >>
  4. Can I use my 401(k) as a collateral for a loan?

    Although federal Internal Revenue Service, or IRS, regulations prohibit using a 401(k) account as collateral for a loan, ... Read Full Answer >>
  5. Why do economists think it is important to track discretionary income?

    Economists track discretionary, and disposable, income as a proxy for the growth in the financial health of average citizens ... Read Full Answer >>
  6. What is the difference between disposable and discretionary income?

    According to the Bureau of Economic Analysis, or BEA, disposable income is the amount of money an individual takes home after ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!