points) Saving / Investing: You need to make a saving and investment plan. First
ID: 1171851 • Letter: P
Question
points) Saving / Investing: You need to make a saving and investment plan. First, determine how much money you will set aside for emergency savings. Then, determine how much you will set aside in an IRA (or other retirement plan). Based upon your savings and average gains, complete an analysis of how much you should have at retirement because of compound interest. http://beginnersinvest.about.com/od/savingsanddebtmanagement/tp/saving-money.htm Emergency savings- why and how much Discussion of making an investment plan to suit your risk preference and financial needs Discussion of how to save for retirement Compound interest analysis- how much will you have at retirement?Explanation / Answer
Emergency savings fund:
Emergency savings can help in providing debt free means to save from sudden financial shocks like long term illness, retirement, any sudden home repairs etc.
How much is needed:
Every household must have enough emergency savings. Some people are more vulnerable to unforeseen risks and has to save more. When calculating monthly savings everything must be included like transportation, food, periodic expenses such as taxes, insurance expense etc.
Investment plan to suit risk preference & financial needs.
Multi asset risk based investments:
These diversified professionally managed services each target level of risk. They seek to maximize the returns at that risk for long term growth either through discretionary managed funds or single funds. Since this is helpful in long term growth, they are suitable for retirement benefits.
How to save for retirement:
Since retirement is a long term objective for any individual, investors concentrate on capital growth stocks. Mutual funds & real estate represent investment options for capital growth. There are four types of investment profiles from which decision can be made:
Compound interest analysis:
Many people in their adult life doesn’t have enough money to invest, but they have time to let investments mature. This is a critical & valuable piece of retirement saving. This can be due to compound interest. This allows earning interest on interest, the more the time, the more you can earn. For example even if you put$45 a month it will be worth three times more if invested at the age of 25 then if you wait to start investing at age 45. This is the benefit of compounding. This helps in investing more for the future time period.
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