How will you invest in your future?

One way to reach your long-term savings goal is investing. 

Do you know what investing is? 

It is a resource that you place your money that may help your money grow through interest, income or worth.  If you believe that investing money is only for adults you are wrong.  The earlier you start at saving and investing your money the more time you will have for your money grow. 

What do you typically do with the money you earn?

Do you put part of your money in a savings account.  Savings account is a type of bank account that is use to save money and earn interest.  Interest is a payment for the use of the money.  Interest is calculated by multiplying the principal (money willing to loan) by the interest rate (cost of borrowing money) by time (life of loan).    Savings account is a way to invest money.

There are only two ways for you to invest. 

You invest by “loaning” money or “owning” money.  You can loan your money to financial institutions, government or corporation.  You can own part of something such as part of a business, property or collectibles. 

Can you describe a time you loan money to a friend?  Was the money returned?  Whenever people loan money, they expect to be repaid later.  With certain type of investments, people hope to earn money in addition to their original investment.    For example, in a savings account, you loan your money to financial institutions, they can use the money until you withdraw it.  In exchange for using the money, financial institutions agree to pay interest.  financial institutions are credit unions, banks, savings and loan associations.  Moreover, savings account is an income investment.  The investor expects to make money in addition to his or her initial deposit.  But the money made is low-risk, because there is a small chance of losing the money.  So “loaning” money is low risk and since the risk is low, the rate of return is low as well.

On the other hand, are you familiar with stocks?  Stock represents how much of the business you own.  Individuals buy stock in public company.  If the company does well, the stock will likely go up in value.  If the company does poorly, the stock will likely go down in value.  Therefore, these investments are growth investments and are considered higher risk, since there is no guarantee the investment will increase in value.

How should you invest?

You can invest your money through owning stock and real estate.  Stock is owning part of a company.  Real estate is owning property. 

You can invest your money through collectibles and mutual funds. Collectible is owning materials.  Mutual funds are owning a combination of investments types. 

You can invest your money through savings accounts and US savings bonds.  Savings accounts are loaning money to financial institution and US savings bonds is loan money to federal government. 

You can invest your money through CDs (Certificates of Deposits) and MMDAs (Money Market Deposit Accounts).  CDs are low risk because you are loaning your money to a financial institution.  MMDAs are low risk because you are loaning your money to a financial institution. 

Lastly, in addition to stock, real estate, collectibles, mutual funds, savings accounts and US savings bonds, youcan invest your money through Money Market Mutual Funds which is similar to the MMDAs.  Also, you can invest your money through Corporate and Government Bonds which is loaning money to companies and government entities. 

Now can you please let me know what investment method you would use and why you chosed one investment method over another? 

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