Disclaimer: The views expressed are those of the presenter and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

You have budgeted and identified an amount to save monthly You have budgeted and identified an amount to save monthly. Where are you going to put your savings?

Investments An investment is anything you acquire for future income or benefit, which increases your wealth Good investments will make money; bad investments will cost money. Important: Always do your homework. Gather as much information as you can.

Types of Savings Accounts Money Market Account Earn interest No fee if minimum balance is maintained May offer check writing services Insured by FDIC/NCUA up to $250,000 Savings Account Easy access to money Earn interest Move money easily from one account to another Insured by FDIC/NCUA up to $250,000

Types of Savings Accounts Certificate of Deposit (CD) Earn interest during term (3 mo, 6 mo, etc.) Must leave deposit in account the entire term to avoid penalty fees Receive principal & interest at the end of term Insured by FDIC/NCUA up to $250,000

Investments An investment is anything you acquire for future income or benefit. Investments increase by generating income (interest) or by growing (appreciating) in value.

Types of Investments Bonds – Lending money to a federal or state agency, municipality or other issuer. It is an IOU and issuer promises to pay a stated rate of interest and face value Stocks – Becoming part owner of the company Mutual Fund – Investing in many companies (diversify risk)

Retirement Investments Individual Retirement Account (IRA) Build wealth and retirement security Money grows tax-free Penalty fees if money is withdrawn before the age of 59 ½ 401K Plans Certain percentage of before-tax salary is put into plan for retirement Employer matching Professionally managed Investment choices vary in risk

Retirement Investments A 20-year-old who begins investing $3,000 each year toward retirement will have a nest egg over $1.2 million at age 65 if that investment earns an average annual rate of return of 8 percent. If you wait until you are 40 to start investing, the results are much lower (about $275,000).

Other Investments Building Equity Quicker: Investing in your House Investing in a house Want to build equity (difference between market value of the house and the balance on mortgage) Mortgage Term 30 years 15 years Loan amount $118,000 Months to pay 360 180 Annual percentage rate 4.0% 3.0% Monthly payment $563 $815 Total interest $84,806 $28,680 Interest savings   $56,126

How much risk should you take? Financial Goals – How much money do you want to accumulate over time? Time Horizon – How long can you leave your money invested? Financial Risk Tolerance – Are you in a financial position to be riskier? Inflation Risk – Investment sensitivity to inflation rate.

Start Your Own Business Entrepreneur (än trə prə nər ׳) n. An innovator and risk taker who tries a new way of doing things; one who develops products and processes and organizes economic resources to please customers.