Category Chapter 1

Oct 15 2014

Here’s How to Become a 401k Millionaire

“If your job offers you a 401k or similar retirement plan, you’ve got one of the very best investment tools at your disposal.”

To become a 401k millionaire, all you need is a paycheck, reasonable options in your retirement plan, and time.  This article also explains that once you start putting money into the plan, the tax-deductible investments grow and are tax-deferred until you begin to withdraw money from your 401k account.  As an added bonus, your employer may match all or part of the money you contribute to your 401k account.

A very useful table that shows how many years it will take for you to become a millionaire based on how much you (and your employer) invest each month with different rates of return is also included in this article.  And there are also suggestions for increasing the amount that you save or invest in a 401k account or other savings or investment accounts.

For more information go to http://www.fool.com/retirement/401k/2014/09/27/heres-how-to-become-a-401k-millionaire.aspx

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Stress the importance of beginning an investment program sooner rather than later.
  • Discuss ways to save the money needed to start an investment program.

Discussion Questions

  1. Why is it important to begin saving and investing sooner rather than later?
  2. Assume you (and your employer) invest $250 a month in your 401k account. How long will it take for you to become a millionaire if your investments earn annual returns of 10 percent?  (Note:  Using the table in the article, the answer is 35.5 years.)
Oct 4 2014

Thinking Like A Rich Person

While thinking about getting rich will not get you there, certain attitudes (along with accompanying behaviors) can move you in that direction. In his book How Rich People Think, Steve Siebold makes these suggestions:

  1.  Leverage, the use of other people’s money to make money, is the foundation. Look for investment opportunities that will grow your wealth faster than saving part of your wages as an employee. Look for methods to solve problems to make money.  New products and services are created each day, and some will result in large fortunes.
  2.  Avoid the lottery since only a very, very small number of people will retire using that financial planning path.
  3. Worrying about money is a waste of time. Concentrate on problem solving to make money. Even as an employee, your creativity and innovations can result in a higher salary.
  4. Emphasize investing instead of spending. This action will result in higher wealth.
  5. Use credit to your advantage, not for things you don’t need and can’t afford.

 For additional information on thinking like a rich person go to:

http://www.foxbusiness.com/personal-finance/2014/09/12/5-ways-to-think-like-rich-person/

Teaching Suggestions

  • Have students talk to others to obtain additional suggestions for improving a person’s long-term financial security.
  • Ask students to propose a product or service that solves a problem in our society and could result in future income.

 Discussion Questions 

  1. What are common barriers that people face when taking the actions suggested above?
  2. Describe additional actions that might be taken to create long-term wealth.
  3. What are some examples of problems to be solved in our society that could be the basis for future products or services?
Aug 16 2014

Can You Pass a Personal Finance Test?

This quiz can be used as a lecture launcher to start your Personal Finance course.

Originally given to 5,000 high school seniors that participated in the JumpStart Coalition for Personal Financial Literacy, the 12 questions in the survey test students on their ability to manage financial resources such as

  • Credit cards
  • Insurance
  • Retirement planning and investments
  • Savings and spending options
  • Educational loans
  • Taxes

For more information go to  http://www.bankrate.com/brm/news/pf/20060421c1.asp

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • As a lecture launcher for the first day of your Personal Finance course.
  • To preview important personal finance topics that will be covered in the course.
  • Stress why everyday decisions can make a “big” difference in the quality of a person’s life over a long period of time.

Discussion Questions

  1. How many of the 12 questions did you get right? (Note:  Correct answers are provided for all 12 questions.)
  2. Do you understand why your incorrect answers are wrong and why there is a better answer?
  3. How can the questions in this quiz help you improve your ability to manage your personal finances and improve the quality of your life now and in the future?
Jul 26 2014

Retirement Catch Up: Saving After 50

“. . .more than a third of people 55 and older have saved less than $10,000.”

According to Carrie Schwab-Pomerantz, President of the Charles Schwab Foundation and daughter of Charles Schwab, there are a number of steps anyone can take to get their financial house in order.

For example, Ms. Schwab-Pomerantz suggests that savings should be non-negotiable–it’s that important.  To increase the amount saved, people should take a hard look at where they are spending their money.  For example, do you really need cable television or that new car?

She also suggests that a person in their 20s should save 10 percent of income in order to save the money needed for a comfortable retirement.  If the same person waits until she or he is in their 30s, the percentage for savings increases to 20 percent while someone in their 40s will need to save 30 percent of their income.  Finally, a person in their 50s will need to save 40 percent of income to provide for retirement.   The Bottom Line:  The percentage a person must save for a comfortable retirement increases if they wait to begin a savings and investment program.

For more information go to http://finance.yahoo.com/news/retirement-catch-up–saving-after-50-043631641.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students how small changes in how they manage their financial affairs can change their lives both now and when they reach retirement age.
  • Stress the importance of beginning a savings and investment program sooner rather than later.
  • Use a Time Value of Money calculation to show how regular savings can increase over time.

Discussion Questions

  1. Why is it important to begin a savings and investment program when you are in your 20s?
  2. Where does the money come from to begin a savings and investment program?
Jul 9 2014

The Sharing Economy

Saving money or earning extra income can be as easy as using an app to rent a car or lend someone your backyard tools. With about 5,000 sharing companies, organizations and programs in operation, consumers could save hundreds and even thousands of dollars a year.

The main focus of the sharing economy is car and bicycle rentals, home sharing, and shared nanny services.  But consumers can also borrow drills, saws, ladders, lawn mowers through a community tool shed.

To avoid obvious dangers, be sure to use a sharing service that screens potential customers with background checks and identity verification. Technology can increase trust with online profiles and reviews from users.

There is also money to be made in the sharing economy by providing rides to others or renting out an extra bedroom. Before getting involved in the sharing economy, be sure to have proper insurance coverage and an understanding of tax implications. Participants in the sharing economy also note the social benefits of connecting with others from around the world.

For additional information on the sharing economy, go to:

http://www.kiplinger.com/article/business/T049-C000-S002-cash-in-on-the-sharing-economy.html

http://www.kiplinger.com/article/spending/T050-C000-S002-sites-to-help-you-save-make-money-by-sharing.html

Teaching Suggestions

  • Have students research various apps that facilitate transactions in the sharing economy.
  • Have students create interview questions that they might ask someone who is a buyer or seller in the shared economy.

Discussion Questions 

  1. What benefits are present for individuals and society as a result of the sharing economy?
  2. Explain how technology helps to increase the participation and acceptance of sharing economy activities.
  3. What concerns should be addressed when participating in the shared economy?
Apr 23 2014

The Slacker’s Guide to Saving for Retirement

Whether retirement is coming soon or feels far away, it’s something you need to think about.

This article encourages students to make retirement planning a part of their budget and one of their financial goals.   It also points out the benefits of starting early—even if students can contribute only a small amount because of other obligations that include paying off student loans and other debt obligations, paying rent, buying groceries, and establishing an emergency fund.

A very good suggestion included in this article is to start by saving just $25 from each paycheck, and then increase the amount until someone feels they have reached a limit they are comfortable with.

Other suggestions include participating in a 401(k) account at work and using bonuses and salary increases to boost the amount contributed to your retirement account.

For more information, go to

http://finance.yahoo.com/news/slackers-guide-saving-retirement-113005671.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Encourage students to develop a long-term financial plan that includes retirement goals.
  • Discuss time value of money examples that show how small dollar amounts invested on a regular basis can help achieve long-term financial goals.
  • Launch a discussion about the different types of retirement accounts.

Discussion Questions

1.  Many people never begin saving or investing because there is never anything left over at the end of the month.  How can you find the money needed to begin saving and investing?

2.  Why should you begin to save for retirement now instead of waiting until later in life?

Apr 16 2014

Do You Need the Retirement Estimator?

Are you saving enough for your retirement?  The Retirement Estimator gives you an estimate based on your Social Security earnings.  However, be aware that it is only an estimate since your earnings may increase or decrease in the future.  Moreover, your benefit amount may be affected by military service, railroad employment or pensions earned through work on which you did not pay Social Security tax.  Remember, your estimated benefits are based on current law and the law may change because by 2033, the payroll taxes collected will be enough to pay only 77 cents for each dollar of scheduled benefits.

For additional information about who can use Retirement Estimator and how you can estimate your retirement benefits go to http://www.socialsecuirity.gov/estimator/.

Discussion Questions

  1. How do you decide which calculator to choose?
  2. What are some other possible sources of income for retirees?
  3. How can the Internet assist you in your retirement?

Teaching Suggestions

You may want to use the information in this blog post and the original resource to discuss

  • What are the two primary reasons for increasing the normal retirement age?
  • What are some factors that may, or may not, affect your retirement benefits?
Apr 2 2014

Can the Government Get Us to Save More for Retirement?

Millions of Americans aren’t saving enough for retirement. Now the President is getting involved and has proposed a new way to help workers save more!

According to a survey by the Employee Benefit Research Institute, 46 percent of American workers had less than $10,000 saved for retirement. The survey also revealed that half of all workers and the majority of part-time workers didn’t receive any retirement benefits from their employer.

To encourage workers to save more, President Obama proposed the “MyRA” plan that allows workers to invest $5,500 a year in government savings bonds that earn 2% to 3% until their balance reaches $15,000. At that point, the money in the account can be rolled over to a private sector Roth IRA, where the money can continue to grow tax-free.

While MyRA accounts are seen as a first step to encourage workers to begin saving, critics argue that the tax-free withdrawals encourage workers to withdraw money before reaching retirement.

For additional statistics on how much Americans save or more information about MyRA accounts, go to http://money.cnn.com/2014/02/11/retirement/retirement-savings/index.html?section=money_pf.

Discussion Questions
1. Many people never begin saving or investing because there is never anything left over at the end of the month. How can you find the money needed to begin saving and investing?
3. Why should you begin to invest money now instead of waiting until later in life?
3. What are the advantages of a MyRA savings plan? of a Roth IRA plan?

Teaching Suggestions
You may want to use the information in this blog post and the original article to discuss
• Why students should develop a long-term financial plan that includes both savings and investments.
• Time Value of Money examples to show how small dollar amounts invested on a regular basic can help achieve long-term financial goals.
• Different types of retirement accounts.