Investing Money towards Retirement Essay Example | Topics and Well Written Essays - 1250 words

Investing Money towards Retirement - Essay Example In the United States traditionally parents assume the cost of putting their kids through college. Financing the college education of two kids can become a very expensive ordeal. Like most working adults Sam is struggling to get by, but he realizes he has to start saving towards these two goals or he won’t have enough time left to accomplish his goals. Sam’s master plan entails saving $150 a month for the foreseeable future in order to put his two kids through college and to be able to retire at the age of 60. His two kids are age 3 and 8 years old. Assuming his two kids will start college at the age of 18 like most teenagers Sam will have to start spending money on college tuition 10 years from now. Sam’s plan of saving 150 a month implies he will save $1,800 a year. Assuming he leaves the money in the bank and makes 1% rate on his saving Sam will have 10 years from now $18,919.25. This amount of money is not sufficient to put his elder kid through four years of college. Sam needs to make adjustments to his plan. The simplest way to adjust his plan is by making better investment options that will allow Sam to make a higher return on his investment. Depending on the banking industry for long-range savings is not a wise move due to the extremely low-interest-rate that this industry offers. Typically interest earns on a banking account is not sufficient enough to offset inflation. Mr. Johnson has to start an investment plan that is aligned with his long-term financial goals. Investing money is not a rocket science, but it requires a person to get educated on financial tools such as stocks, bonds, and mutual funds. Common stocks are one of the simplest types of investment options. A common stock is the transfer of a piece of ownership in a company in exchange for cash.