1. Long Term Savings

2. The longer you have for saving up, the less money you need to allocate each month toward your goal.

3. The Power of Compound Interest
if you begin saving $100 a month at age 21 and earned 8 percent interest, by 65 your account would be worth about $447,000.

4. The Power of Compound Interest: Cont....
Increasing the monthly contribution to $200 would double that to about $893,000

5. Because of the power of compound interest, it’s to your advantage to start your long term savings as early as possible!

6. Saving for College – Strategies
Start early – Begin an account for your child in their first year.
Assemble a team – Try to get relatives involved. They can give college money as gifts for Christmas or birthdays.
Tip: Let your child pitch in as well.

7. Saving for College - Strategies
Seek security plus a higher interest rate.
Online banks tend to have higher interest rates.
Look into using mutual funds and other investments.
Warning: As the interest rate rises, so does the risk!

8. Tip: Take advantage of your college’s financial aid office!
Scholarships
Offered on an academic or athletic basis
Some cover the entire tuition but most only cover a portion of the bill.
You don’t have to pay them back!
Tip: Take advantage of your college’s financial aid office!

9. Saving for Retirement
Consider investment options that provide a better rate of return on your funds than your checking or savings account at your bank.

10. IRA’s Retirement accounts you can open at your bank
They allow you to create a portfolio of stocks, bonds, and mutual funds
Two types: Traditional and Roth IRA’s

11. Traditional IRA’s You can fund your IRA with cash or cash equivalents.
You pay no income tax on the money you deposit into your IRA.
Warning: Taking money out of an IRA before you hit age 70 will incur penalties.

12. Roth IRA’s Not tax deductible Fewer penalties for taking money out
Deposit limit: $5,000 per year($6,000 if you’re over age 50)

13. Roth IRA’s
If you have a Roth and Traditional IRA, the deposit limit applies to both accounts combined.
The limit is still $5000 or $6,000. It doesn’t double just because you have two accounts.

14. 401(K) Processed through your employer Annual deposit limit: $16,500
Any contributions will not be taxed until you withdraw the money

15. 401(K)
Earnings made from the 401(k) are tax deferred until the money is withdrawn.
Withdrawing money before you reach the minimum age (60) will result in penalties.
Some employers match a percentage of your contribution

16. Other Countries
The term 401(K) does not mean much in other countries, since it refers to a US law.
However, other countries have similarly functioning accounts.
The term has become common enough that these accounts are sometimes referred to as 401(k)’s.

17. Self-Reflection Questions:
What financial goal is needed to retire comfortably?
Will my employer match 401(k) contributions?
What type of retirement savings account best suits my needs?

18. Action Tips:
Start saving now to allow earnings to compound and accumulate to a greater extent.
If your employer matches 401(k) contributions, add the maximum percentage that your employer will match to ensure you get as much of a return as possible.
If you put money into an IRA or 401(k), leave it there; taking it out results in penalties and fees.