 You
have worked hard for your money and you want to make the
most of your investments so you will have the necessary
funds when you need them.
The simplest way to earn money on your savings is to
open a savings account at your local community bank or
other financial institution. You can choose from the
typical savings account, the money account or
Certificate of Deposit (CD).
Once you have established a good savings foundation, you
may want to diversify your assets among other
investments. Investing looks toward the future and is
not a get-rich-quick scheme. Here are some ways to
invest some of your savings with an eye toward the
future.
Bonds
When you buy a bond, you are lending money to a federal
or state agency, municipality or a corporation. They
promise to pay you a fixed rate of interest during the
life of the bond and then repay the entire face value of
the bond when it reaches maturity. To estimate how the
value of your bond will grow over the years, the Federal
Reserve suggests using the Rule of 72. For example, you
invest in a bond that is worth $5,000 today at 8 percent
interest. Divide 72 by 8 and you get 9, meaning your
investment will double every nine years.
Savings Bonds
These bonds range from $50 to $10,000. They are
government-issued and government-backed.
Treasury Bonds, Bills and Notes
Treasury bonds are securities which are sold at a
discount of their face value with terms of more than 10
years and secured by the federal government. These bonds
are used to pay for varied government programs and
interest is paid semi-annually. Treasury bills are
short-term securities sold at a discount of their face
value with terms of 3 months to one year. Treasury notes
are interest-bearing securities which mature within two
to 10 years and pay interest every six months. All of
these investments are sold in
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increments of $1,000 and can be
purchased directly from the U.S. Treasury.
Stocks
When you purchase stock, you become part owner of a
company and, as a stockholder, you receive dividends
from the company. If the company does well, your stock
appreciates in value. However, if the company does not
do well, you will lose money.
Mutual Funds
With mutual funds, you invest in many companies. Your
investment is spread across many companies rather than
relying on just one to perform well.
IRA
An individual retirement account (IRA) helps you build
retirement security. The money you invest in a 401(k)
plan grows tax-free until the time you are ready to
withdraw it.
Many companies offer a 401(k) plan for their employees’
retirement. Participants authorize a certain percentage
of their before-tax salary to be deducted from their
paycheck and put in a 401(k). Employers may also match a
portion of every dollar invested in a 401(k) by the
employee.
Qualified Plans
If you are self-employed, you can invest up to $42,000
annually in a qualified plan for your retirement.
There are myriad ways to increase your wealth and save
for your retirement. Talk to your community banker or
other financial adviser to see which plan best fits your
needs.
CONSUMER TIPS is provided as a public
service by the Missouri Independent Bankers Association
AND
Community Bank of the Ozarks
P.O. Box 43
Sunrise Beach, MO 65079
(573) 374-5245
1-800-927-4314
www.cbobanker.com
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