PERSONAL FINANCE

Rule of 72

Albert Einstein is credited with discovering the compound interest rule of 72:

What is it?

72 / interest rate = # of years to double

Try the example . . .

Example If I have a $5,000 investment earning 10%

interest how long will it take my $5,000 to become $10,000?

72 / 10 = 7.2About 7 years for the $5,000 investment to

become $10,000.

It is rumored

. . . that Albert Einstein once said that compound interest is the most powerful force in the universe!

Keep this in mind!

Insurance Insurance is an important component of

personal finance. In particular Life Insurance provides the beneficiary with a lump sum payment to pay for things like:

Mortgage Car loans Daily living expenses

There are 2 types of life insurance:

1. Term 2. Permanent Term -- covers a fixed number of

years. Permanent -- provides lifelong

coverage.

Common mistakes young people make with money:

1. Buying items you don’t need . . Paying for them with interest!!!

2. Getting too deeply in debt.3. Paying bills late – tarnishes your

credit.4. Having too many credit cards.5. Not watching expenses.6. Not saving for the future.

5 Things you SHOULD know about credit cards:

1. Use them wisely. Many have an annual interest of more than 18%.

2. Don’t be distracted by special offers. 3. Pay more than the minimum monthly

payment.4. Pay on time to avoid late penalties and a

lower credit rating.5. Keep credit card numbers private and

verify that online transactions are encrypted.

5 Things you SHOULD know about checking accounts:

1. Shop around for the lowest service charges and features that fit your needs.

2. Regularly update your checkbook.3. Keep track of your daily balance so

you won’t overdraw your account.4. Use online banking to track

transactions and reduce service charges.

5. Check your bank statement for errors.

Financial Planning for High School Students:

1. Consider getting a part-time job. 2. Open a bank account.3. Start the habit of monthly saving.4. Take a personal finance class or

join an investment club.5. Research options for financing your

college education.

Plan for retirement while you’re young . . . it pays off.

Who do you want to be?

Person A Invests $1,000 per year from age 20 to 30 at 7% annual interest compounded.

Person B Invests $1,000 per year from age 30 to 65 at 7% annual interest compounded.

Plan for retirement while you’re young . . . it pays off.

Who do you want to be?

Person A’s retirement account balance at age 65 is: $168,514!

Person B’s retirement account balance at age 65 is: $147,913!

You choose . . . If you could have $1,000,000 right now or $0.01 today that will double for a month,

which would you choose?Excel Demo