Now that you understand the basic investing terms, your first actual investment is going to be one in your future. Experts recommend allocating 15% of your monthly income toward retirement.
Before you start exploring your options, though, you’ll need to set a goal, or a target number. This number will represent how much you need to have saved for living comfortably and independently throughout your retirement. A good way to set a target number is to take your current living expenses and multiply that by 400. This will give you the amount you’d need to have to sustain yourself, based on a 4% investment return.
Here’s what you’ll want to look for:
This refers to matching monies offered by employers. Most will offer to match your contributions up to a certain limit. For example, your employer may offer a 100% match on the first 3% of your salary. If you earn $60,000, that means for the first $1,800 you have withheld from your paycheck and put into your retirement account, your employer will gift you an additional $1,800 in completely tax-free money. Even if all you do is park that money in something stable like a trust fund, it’s the highest, safest, most immediate return you can earn anywhere in the stock market. Don’t leave free matching money on the table!
If a retirement vehicle is tax-deferred, this means all the assets parked in that particular fund will not be taxed until they are withdrawn. This allows the money to grow, untouched, for years.
If a retirement fund is tax-deductible, every dollar you put into that fund is subtracted from your taxable income, automatically lowering your taxes. For those in their peak earning years, this can provide considerable tax savings.
|Features/requirements||401 (k)||IRA||Roth IRA|
|Tax-deductible||Yes||Depends on income, tax-filing status and other factors||No|
|Maximum Yearly Contribution (2017)||$18,000.00||$5,500.00||$5,500.00|
|Maximum Yearly Contribution Age 50+ (2017)||$24,000.00||$6,500.00||$6,500.00|
|Age Limit For Contributions||None||70 1/2||None|
|Income Eligibility (2017)||Any income earned through a company that offers a 401(k)||Any earned income as reported on a W-2, wages from self-employment, tips and alimony||Any income with a gross worth of less than $118,000-$133,000/yr or $186,000-$196,000/yr for taxpayers filing jointly|
Once you have chosen your retirement fund, you’ll need to choose somewhere to invest the money. Low-risk investment vehicles, such as federal bonds or trust funds, are usually the best choice.
If you are saving for retirement through the use of a 401(k), be sure to check if your employer offers a target date fund.
The term “target date” refers to your planned retirement date. You’ll know your employer offers a target date fund if there’s a calendar year in the name of the fund, such as A.J. Holdings Retirement 2050 Fund. Simply make an estimated guess of the year you’d like to retire, and then pick the fund with the date closest to your projected retirement.
A target date fund is a smart choice because it spreads the money in your 401(k) across many asset classes such as large company stocks, small-company stocks, bonds and emerging-markets stocks. Then, as you near the target date, the fund becomes more conservative, owning less stocks and more bonds, automatically reducing your risks as you near the date of your retirement.
To get the ball rolling on whichever retirement plan best suits your needs, you’ll need to speak to an HR representative at your workplace. With a bit of work and a lot of planning, you’ll have your future secured in the best way possible.
What steps have you taken toward securing your future? Share your retirement plan with us in the comments!
Last week I gave ideas for youth to earn money. Once teens learn how to earn money, they need to learn how to spend it. When I was a teenager I earned money, saved money, and avoided debt, but I wish that I would have understood how to spend money an intentional and focused way. I hope this post helps at least one teen avoid my mistake.
Twenty years ago, we didn’t have social media, but I often got distracted by items “on sale." I really loved the feeling of getting a good deal. One time, we were an outlet store that had jeans on sale for $5. There was no dressing room to try the pants on, but I bought 4 pair because they were cheap. The pants did not look good. I didn’t like how they fit, so I didn’t wear them. It wasn’t a good deal. I would have been better off to buy one $20 pair of pants which fit me and which I loved. I needed a plan to help me stay focused on what I wanted.
There are 3 keys to budgeting:
Budgeting is really simple to understand. You decide where to spend your money rather than letting your friends, social media, or advertising decide. Through budgeting, teens decide where their money will go and then they make it go there.
Youth use plans every day: recipes, school schedules, and game plans. For example, every teenagers has an education plan. Their counselors and their parents help them to make this plan and evaluate it regularly. Then, they take classes based on the plan. They consider the different classes and decide which classes that they will take: some are required and some are optional. It would be very chaotic if they just showed up to school and decided what class they would attend that day based on what was going on.
“Oh, there is a field trip in the choir class: I think I’ll join them.”
“There’s a party in Spanish. I’ll make that one of my classes.”
But, this is what often happens with our money and our eating habits. What if parents, leaders, and teachers sat down with the youth and helped them decide to spend money in the same way they help them decide which classes to take? There would be some required classes. We also have required expenses called needs: gas for the car, supplies, clothes, etc. There are some elective classes, and there are elective “variable expenses" (vacation, entertainment, and eating out).
Let’s say you have a plan for your vacation. What if the weather is bad, or what if you get sick? What if you hear about a neat activity that you hadn’t planned on? You can adjust the plan. You don’t abandon the plan. There are unknowns. What if an opportunity comes up which you weren’t expecting?
A couple of weeks ago, my niece invited my daughter Jackie to come up to Alaska with their grandparents. Jackie hadn’t budgeted for that, and she didn’t have much time - only three weeks. She had been saving her money and once she heard about Alaska, she focused on that trip. I heard her tell someone that she didn’t want to spend her money because she was saving it for Alaska.
Sometimes unexpected opportunities come up that you want to do. That isn’t the same as buying anything that’s a good deal or letting others talk you into it. If we hadn’t had the money, it would have been fine to say that we couldn’t afford it and that we will travel to Alaska when we can afford it. But, our family had a vacation fund. We decided we had enough in there to pay for half of her ticket. It took most of her savings to pay for the other half of the ticket.
Not everything is predictable. You can predict a lot of things, but without flexibility, budgets will fail. Back to the school schedule analogy, if a class isn’t working, it can be evaluated and changed. The schedule isn’t permanent but it is set.
Although budgeting does have flexibility, it is important to still follow the budget. Teenage drivers learn pretty quickly that they can only drive until the car runs out of gas. At that point, they have to refill. So, they have to watch the fuel gauge or they get stranded.
Budgeting also requires a gauge in order to follow our budget. Money is finite, so it’s important to know how much is left. It can be a very simple system. Teens start out with few expenses compared to adults, so it is relatively simple.
One example of a gauge is the envelope system. They have an envelope for entertainment, and they can see how much is in there and plan their entertainment. If they have a phone, there are a lot of apps that allow teens to do electronic envelopes. Without a gauge, budgeting doesn’t work, and we run out of fuel/money.
Life isn’t about money - money is a tool for life. Parents, grandparents, and other leaders of youth, we can teach them that they can budget their money to help them to live their life and be their best selves. They can stick to their financial plan, schedule, and budget. They can say "no" to expenses that aren’t right for them.
Whether you're a regular news junkie or you rely on your better half to keep you updated on the latest, you'll get the same conflicting messages about the state of today's economy. One day you'll hear about rising wages, and the next day you'll read about the lagging growth in the GDP, or Gross Domestic Product.
The only thing certain about today's economy is that it is uncertain. While things look relatively stable now, no one can guarantee what the next few years will bring.
Fortunately, you don't have to give up on the home of your dreams because of a fluctuating economy. Read on for four steps you can take to make sure your money - and your house - are completely safe regardless of what's going on.
The magic number for down payments has been established at 20% of the home's value. Those who can't afford to plunk down that much money, though, will often put down a much smaller amount.
If you can't come up with a down payment worth at least 5% of the home's total value, you may not be ready to buy a house just yet, because having little or no equity in a home could mean taking a loss should you need to sell it. Also, not making any profit from selling your home means you won't have funds to cover the down payment on your new home and offset the closing costs. That's why it's always best to own as much of your house as you can.
If you've been hoping to qualify for a more expensive home, you may be planning to push the limits of your mortgage approval. In fact, it's best to buy a house that comes in well under your approved limit, allowing you to maintain a lower debt-to-income ratio. This will give you breathing room and keep your mortgage payments from dwarfing your monthly budget.
Also, if the economy worsens and you feel the effects, you'll have a smaller mortgage payment to scrape together each month.
Here's how to cut through the hype of the real estate market and find the Realtor that is truly best for you:
A professional inspection before signing on a home is a given, but did you take a careful look around? You don't want any unpleasant surprises after you've moved in.
Check for the following:
Don't forget to call, click or stop by Wasatch Peaks Credit Union to learn about our fantastic programs on home loans and mortgages before you start your search. We're here to help you with the finances as you find the home of your dreams!
Did you recently purchase a new home? What did you wish you'd known before you started on your search? Let us learn from your experience; share your wisdom with us in the comments!
I get to serve with teenagers in my neighborhood. When I talked with them about budgeting money, they all said, “We don’t have any money to budget!” That is an issue. Besides the occasional gift, they didn’t have steady income. They need to earn money in order to budget that money.
Here are some ways for teens to earn money:
My first hourly job was working as a cashier at a drycleaners. My neighbor worked there. She told me they were hiring and asked if I was interested. It was a nice job for a high schooler because they would let me do my homework when business was slow.
This could be any product or service that others will buy. Here are a few ideas:
This is an option I didn’t have as a teenager. Internet wasn’t available to the public until I was in college, and most connections were dial up, so they were slow. There are so many options now for online businesses! One teenager I heard about was interested in gems and he had an online gem store. How cool! The internet opens up a lot of options. Some teenagers blog. Online businesses can be started inexpensively.
What jobs did you have as a teenager? There are so many options, so if you have a teen or are a teen who doesn’t have money to budget, try some of these work ideas out and let us know how it goes!
Managing money is a foundational life skill. There are so many factors involved and so many open-ended questions at play. How much should you be saving? When is it worth spending more? How do you keep spare change from burning a hole in your pocket? It takes years of discipline and training to perfect this skill, and ongoing self-control to maintain it.
That's why it's best to give your kids a head start on money management and saving. As a parent or guardian, remember that the lessons you plant today will take root and blossom, enriching your child's life for years to come.
Here at Wasatch Peaks Credit Union, we understand the enormity and difficulty of this task. In honor of National Credit Union Youth Month, we're focusing on ways to help make this process as smooth and as simple as possible.
Wasatch Peaks is proud to offer specialized savings accounts that are designed just for kids.
Our youth savings accounts offer no monthly service fee and no minimum balance to earn rewards to help you teach your child that saving money always pays.
We're more than just a place for your kid to keep their money, though. We also want to help your young ones learn all about money management. To do that, we go out of our way to make banking fun and kid-friendly. When your child has an open Kids Club Account with Wasatch Peaks they also have free access to fun kid websites, online games, MONEY MOO$E™ Kids Club Peaks Passbook™, prizes, and more.
When adolescence overtakes childhood, kids need a sense of independence and autonomy. We get this. That's why the holders in our Young Members Accounts are eligible for a Free Visa Debit Checking Card and we’ll refund your ATM fees, nationwide (up to $25 monthly). With our Kasasa Tunes checking account, teens earn $5 every month in iTunes® or Amazon.com downloads! Learning responsible saving habits at an early age will prepare your kids for a sound financial future.
Ready to open an account for your child? Does your child already have one? Read on for three steps to take for ensuring your child gets the most out of a new or existing account:
Now that your child's money will be sitting in an account instead of a piggy bank, let her use this opportunity to save up for something big. Sit down with her and discuss what she'd like to save for. You can create a long-term goal, like saving up for college or for a first car. Also establish a short-term goal, like a new gaming console or a hoverboard.
Set a date for your goals, and then set up a savings calendar for illustrating how much money needs to be saved each month to reach the intended target by the designated date. Discuss ways to add to the savings, being sure to include money from birthday gifts, summer jobs, allowances and chores.
Whether your child is a first-grader or a lanky teenager, if this is their first time owning an account, they'll need you to show them the ropes.
Always bring your young child along with you when you stop by Wasatch Peaks to deposit his savings. Show him how it works and let him see the account balance growing. If your child asks you to withdraw money from his account, make sure he sees how this translates into a dip for his savings.
For teens, you'll need to walk them through that first deposit and withdrawal. When they've probably got the hang of it, it's time to take a step back and let them be on their own. They'll feel like a million dollars managing their account independently.
However, share with your teen that every swipe of their debit card also means a dent in their account balance. Also be sure to warn kids of all ages about security. They should know to never share their account information with anyone, and to keep their debit card in a safe place.
Don't aim to be a helicopter parent, but do keep an eye on your child's account. If he's depositing a lot less than planned, ask him where his money is going. Speak to him about money management and impulse purchases.
Remember: Every financial lesson you teach your child today equips them with money management skills for a lifetime.
How do you maximize the benefits of having a youth account for your child? Share your best tips and techniques with us in the comments!
The first step to teaching your kids about money is talking about money.
“The most effective way to teach is by having frequent discussions and don’t ever lecture,” said Ted Beck, president and chief executive of the National Endowment for Financial Education, in a recent Wall Street Journal article. “Look for teachable moments and always be willing to answer questions.”
Unfortunately, this can also be the hardest.
A 2015 T. Rowe Price survey found that 72% of parents experienced at least some reluctance to talk to their kids about financial matters, and 18% were either very or extremely reluctant. The most common reasons given were that the parents didn’t want them to worry about financial matters or thought they were too young to understand.
But on his blog, the personal-finance guru and radio host Dave Ramsey encourages parents to be more open with their kids about money, even their failures. Parents’ biggest regrets are often not saving enough or going into too much debt, wrote Ramsey. Being honest about that in an age-appropriate way, he stated, can be a powerful lesson.
So how to start the talk?
As parents, we often sign our kids up for soccer teams, swim, piano or dance lessons. But there aren’t any lessons for them to learn personal finance. My son is in first grade, and he is learning what money is and how much each coin is worth. However, it’s up to us as parents to teach him how to use money and to develop healthy financial habits. As parents, we want our children to be financially fit, and avoid some of our mistakes.
Here’s a few financial habits we can teach our children as part of daily life.
In our family, we give our kids a chance to earn money every week. My eleven-year-old daughter told me that her friends don’t have to earn money: they get allowances. She said that she has the worst life out of them. We value work and want them to understand that they earn money from working. They can earn as many dollars per week as their age. So my five year old can earn $5 per week - $275 per year! However, we struggle to consistently record and consistently have payday. We are going to work on that.
Our kids like to count their money. My younger kids still think every dollar is equal. I explained to my daughter that one $5 bill is worth five $1 bills.
We teach our kids to save for specific goals. Last week we realized it can be nice to have general savings also. My daughter was invited to go to Alaska to attend her cousin’s baptism. Jackie had several hundred dollars saved, and we had a vacation fund. We agreed to match her savings. So, she paid half of the airline tickets, and we paid the other half. When unexpected opportunities arise, it is nice to have some flexibility with our savings. She is so excited because she hasn’t seen this cousin and her family for 9 months, although she says it feels like it's been years. I encouraged my other children to keep saving so that they can take advantage of similar opportunities that they will have.
I love to see my kids give, but I don’t force them to give. We give, and our kids notice. I always let whoever is helping me at the store keep the coin change. While I was busy loading the groceries, my 4-year-old daughter put her change into the donation container, which was sitting on the counter. As we walked away, she exclaimed, “I gave money to help the sick people in the hospital!” That warmed my heart.
Shopping gives me so many chances to teach my kids about money. I don’t always take kids shopping because it takes 3 times longer, and it is very tiring. For example, last Monday, we went shopping as a family activity. Our boys ran around the store fighting. But, shopping with kids is worth it because of the teaching opportunities it brings. As we shop and see a lot of cool things, my young kids usually ask to get them. I often reply, “It’s not on the list.” My four year old isn’t the only one that struggles with this. I often want to buy things that are not on the list. She happily tells me, “It’s not on the list.” This is teaching them, and me, to prioritize and to use self control.
At the end of the shopping trip, I let the kids pay for the groceries. I was with my five-year-old last week. The total was 19.56. He paid with a twenty dollar bill. The cashier asked if he would get some change. He said, “No.” That opened up a conversation afterwards. We discussed which one is greater: $20 or $19. I really appreciate that patient cashier who help teach my child. Through this, he is learning the value of money.
We went to Walgreens to pick up some pictures. I let Chloe (4) and her friend look at all the Easter toys. She wanted to buy a stuffed animal. I showed her how much it cost, and explained that she could bring her money back to get it. She asked, “Can we come back today?” I told her that we probably could. We completely forgot about the item that she wanted. I didn’t remember about it until I wrote this post! This experience taught patience and focus.
My oldest daughter has her own library card and checks out her books. She told me she had a $2 fine and she was bringing a five dollar bill. We rode our bikes to the library, and she paid her fine. She is learning responsibility.
All of these stories I mentioned happened in just one week’s time. What money teaching moments have you had in the past week?
Life gives so many chances to teach our kids about handling money and to help them develop good financial habits. As I teach them, I also learn from them and with them. It can be tiring. Being consistent is challenging, but we’re succeeding as long as we keep trying!
However, before going anywhere, you need to understand the lay of the land. First, there’s the language. There are hundreds of investment terms tossed around on Wall Street, and you’ll want to know what they mean.
Second, investing is a whole lot more than just “buy low and sell high.” Understanding the basic concepts that govern the market is key to being a successful investor. So, before you cut your teeth on your first stocks, take the time to learn all you can about investing.
You can start with some easy books. We suggest:
You may also want to browse through these online guides and resources:
And finally, here are 25 important investing terms along with their basic definitions to help get you started:
Which resources did you use to learn about the market? Was there a specific book or website you found particularly helpful? Share your best picks with us in the comments!
The world is a big and beautiful place.
Unfortunately, it is also filled with unethical people who are trying to take advantage of the innocent and the naive at every turn. Your kids may be too young to have been burned, but that doesn't mean they aren't old enough to start protecting themselves. Teach them about scams and con artists and then bring it all home for them with this short, interactive activity.
To talk to your kids about con artists, gently explain that there are some people who will always try to cheat others out of their money or personal information.
Your child may have actually been hustled on the playground when a dominant child promised to give them a toy for a set amount of money and then took their money but "forgot" the toy at home the next day. And the next day. And the next. Or, a classmate may have marketed a toy as the genuine thing when it was actually just a bootleg version of the real one. Online scams are another area where your kids may have encountered fraud.
To begin the activity, help familiarize your children with these four rules:
Once your kids have the rules down pat, begin role-playing with them. Act out a scenario where you play the initiator of a business deal or act like someone using a phone or computer. Be sure to verbalize loudly what you are typing or downloading. When your child suspects a scam, they need to shout "scam alert!"
When your child has successfully spotted all your "scams," switch roles and let them be the dominant actor in the scenarios with you acting as scam-spotter.
Your child will now be ready to face the most crooked con artists out there!
Have you made your child scam-smart? Share your success with us in the comments!
A couple of years ago, we received a lot of money as a Christmas gift from our parents. That gift shocked us because we weren’t expecting that extra income. Adrenaline started running through my body as I thought of what we could do with this money. We were saving for a car, so that’s where we used it. Having a goal helped me calm down. It was great to know where to spend the money so we didn’t regret how we spent it. Even though the timing of bonuses, gifts, or inheritances is often unexpected, you can plan how to spend the extra income when you receive it.
I think all of us would like extra income, but do you know how you would spent it? Would you save it for retirement? Would you spend it on a vacation or a purchase? Would you pay down debt? It’s good to think about this ahead of time so that you know how you would spend extra income.
When Ty changed jobs in November, all of his accrued vacation pay was paid out to him from his previous employer. We didn’t expect that he would change jobs and receive all that money at once. We hadn’t been able to save for Christmas throughout the year, and we were considering using some of our emergency fund for Christmas. When he received that extra income, we paid for Christmas. I was glad that we didn’t have to use emergency fund money because I don’t consider Christmas an emergency, but we weren’t sure how we were going to pay for it.
I have noticed that unexpected income is often followed by an expense. Have you noticed this? Maybe you received a gift and then the washer broke. I have seen this happen enough times in my life and in the lives of others to see a correlation. A few years ago, my friend and I discussed this and how it can feel discouraging. She had learned to appreciate that money comes when you need it. I decided that I wouldn’t let myself be discouraged anymore when this happened. She helped me to learn to be grateful for extra income even if it needs to be used for bills.
After my family had saved an emergency fund, the unexpected repair expenses didn’t use the extra income anymore. I really don’t like to spend our emergency fund - just ask my husband. He teases me about having an emergency fund that I "won’t use even for an emergency.” I reply, “If I spend it, I won’t have it for an emergency!” Anyway, I might still choose to use extra income for an unexpected expense, but having an emergency fund gives me options to pick which money to use.
The purpose of this blog is to help you reach your financial peak. Each week I’ll give you a financial exercise to do. This week’s exercise was fun for me. I hope you will do it! And, I hope you enjoy it. I want you to make a wish list. Prioritize from the most important or most urgent financial goal down to the least urgent goal.
Here is my Extra Income Wish-List:
I often say that we can’t buy everything that we want, but we can do anything. Staying focused is challenging for me. This exercise helped me define what I would do with extra income. Now, I’m ready for unexpected and extra income. It’s welcome anytime!