Take Charge Saving & Investing

Insuring Deposits  FDIC  Federal Deposit Insurance Corporation  Protects Checking, Savings, MMA, & CDs  Insures money up to $250,000  01/01/2011 ~Limit will adjust by the amount of inflation occurred over the previous 5 years  NCUA  National Credit Union Association

LIQUIDITY  What does it mean for your assets to be LIQUID?  How easily they can be turned into $$$  List the following in order of their Liquidity (most to least):  Real Estate, Savings Bonds, Cash, Checking Accounts, Stock, Savings Accounts

LIQUIDITY  Cash  Checking Accounts  Savings Accounts  Savings Bonds  Stock  Real Estate

Earning Interest on Savings  Interest  Money earned by someone that places money in a Savings Vehicle  2 Types of Interest  Simple  Interest earned only on the money you deposited into a savings account (principal)  Compound  Interest earned on both the principal & other interest you previously earned in that account  Compounded daily, monthly, quarterly or annually

Retirement Plan Options Pension Plans [401(k)] Keogh-Self employed pension plan IRA / Roth IRA IRA-Taxed at the end, money taken out Roth IRA- Taxed at the beginning Real Estate is often seen as an INVESTMENT

Investing for Retirement  Pension plans (401K) : company plans that provide retirement income for their workers.  A portion is withheld from your paycheck  Company matches contribution  No Federal tax until you withdraw funds (tax deferred)  Maximum Contribution limit

Individual Pension Plans  Keogh plan-retirement plan for self-employed individuals.  Can save up to 15%  Can deduct that amount from taxable income  Maximum contribution limit

IRA / Roth IRA  Retirement Plan for individuals or married couples  Savings grow tax free  Invested in mutual funds, stocks or other securities

Real Estate  Land & Buildings  Homes/Developed land (safer)  Undeveloped property (usually riskier)  Not very liquid – what does that mean?

How much to save and invest?

 Tradeoff!  Risk Tolerance  Rate of Return  Liquidity  Income

INVESTING Doubling Your Money  Rule of 72  72 / % Rate = # of Years to Double Your $  72/# of Years to Double Your $ = % Rate  Example #1:  $1,000 6% interest rate  72/6=12  You will have $2,000 in 12 years

Diversification, Risk, & Values  Diversification  Spreading of investments among several different types to lower overall risk  Risk  Every person has a different Risk tolerance  Values  Your values may determine where/what you invest your money in

Stocks & Bonds  Stock  A Share of a company’s assets  Stockholders  People who invest in a corporation & own some of it’s stock

Bonds  Tax-Exempt Bonds  Sold by local & state governments. Interest paid on the bond is not taxed by the Federal Gov.  Savings Bonds  Issued by the Federal Gov. as a way of borrowing money.  Purchased at ½ the face value (EE bonds)

Stocks vs. Bonds STOCKS  All corp. issue stock  Represent ownership  Stocks do not have fixed rate  Dividends only paid when there is a profit  No maturity date  Board of directors in control  Stockholders have claim against property of corp. BONDS  Corp. not required to issue  Represent debt  Interest must be paid regardless of profit  Have maturity date  Bondholders have no control of the corp.  Bondholders claim against property comes before stockholders

Stocks  Broker  A person who acts as a go-between for buyers & sellers of stocks & bonds.  Internet brokerage firms are popular now.  Stock Exchanges  Place where stocks are bought/sold on a daily basis.  NYSE –Largest stock exchange  Chicago Exchange –example of regional  Tokyo & London –examples of foreign