Becoming a Millionaire:Savings and Investments

2

Starting a Savings Plan

3

ASSUME: $2000 annual contributionInvested with pre-tax dollars

Earnings tax-deferred & Accumulated to age 65

ESTIMATED ANNUALINTEREST RATE

AGE

20 30 40 50 606% $451K $236K $116K $49.3K $12.0K7% $612K $296K $135K $53.8K $12.3K8% $835K $372K $158K $58.6K $12.7K9% $1.15M $470K $185K $64.0K $13.0K10% $1.58M $596K $216K $69.9K $13.4K

Total Contributions Invested $ 90K $ 70K $ 50K $ 30K $ 10K

K = 1,000M = 1 million

4

Find Money to Save

WATCH THE DAILY LEAKS!!

Save $5 a day (lunch, coke, snacks, etc)

A LITTLE ADDS UP!!!

5 X 7 = $35 a week

35 X 4 = $140 a month

140 X 12= $1680 a year!!!

5

Save Regularly!

Pay yourself first

Use a cash flow plan and a

goal statement to plan

6

Major Goals

Down payment(house, car)

EducationTravel

7

Criteria for Selecting Savings/Investment Products

Yield Safety LiquidityRisk ToleranceTime Horizon

8

Low interest earning account

Low risk

Easily accessible

First step in investing

Helps develop pattern of investing

Savings/Share Accounts

Types of Investments

9

Types of Investments

Certificate of DepositHigher interest than savings account

Must leave money in for fixed amount of time

The longer you leave it in the higher the interest you earn

Available at banks and credit unions

10

You loan money to a corporation or government

Earns higher interest than CDs but not as high as stocks

Low risk for government bondsHigher risk for corporate bondsCan purchase from employer, bank, and brokerages

Bonds

Types of Investments

11

Buying a part of a publicly traded company

As profits increase value of stock increases

Highest rate of return

Highest risk

No limit on how long you have to invest

Available from stock brokers and online brokerages

Stocks

Types of Investments

12

Investment companies pool money from lots of individuals to invest in stocks and bonds

Easy way to invest in a variety of stocks and bonds

Depending on the type of fund risk and rate of return vary

Can purchase from mutual fund companies, brokerages, and online

Mutual Funds

Types of Investments

13

Average Annual Investment Return

1926 - 1999 Savings Accounts 2%

Certificates of Deposit(1 yr) 4.5%

Long - term Bonds 5.3%

Large Cap Stocks 8.32%

Mutual Funds 9.14%

Small Cap Stocks 11.65%

Inflation 3.1%

14

Time it takes to double money

Rule of 72

72 7.2 years=

10%

72 7.2%=

10%

72 time=

rate

72 yield=

years

15

Savings Account earning 2%– 72/2% = 36 years

Certificate of Deposit earning 4%– 72/4% = 18 years

Government Bonds earning 5.3%– 72/5.3% = 13.38 years

Time it takes to double money

16

Common Stock earning 11.2%– 72/11.2% = 6.43 years

Mutual Funds earning 9.14%– 72/9.14% = 7.88 years

Time it takes to double money

17

Diversify

Variety of Investments: Not Just One Type– Stock– Bond– Mutual Fund – CD

18

Ways to Invest

Investment ClubAutomatic Asset BuilderInternetNo-load mutual fundTraditional / Roth IRA

19

How To Save Money

Pay yourself firstDo it nowKeep doing it!Make saving a part of every $ decision

20

For Individual Help Contact:

Consumer Credit Counseling Service

https://onlinecounsel.cccsatl.org/gheac.asp

866-829-3438

(referral #017)