Saving for the Future and Generating a Return (Foundation 6)

The future is coming at you fast and if you’re going to be financially prepared, it’s wise to take steps now. Just ahead, we’ll talk about growing your money to meet future needs. Whether you’re saving for a shorter-term purchase or something longer-term such as investing for retirement the best time to start is now. More on that just ahead. Well, we’re grateful to have you along this Monday. And, as you may know, on most Mondays, our first day of the broadcast week, we focus on first principles those underlying precepts that guide everything we talk about on this program. Each week, we talk about one of the five basic ways that we all interact with money. Here’s what they are: We can earn money, we can live on it, we can give it away, we can owe it to someone or to the government, and we can grow it for the future. Earn, live, give, owe, and grow. Today, let’s talk about the last of those five growing money. BATTLING INFLATION The level of inflation we have seen over the past year-and-a-half makes abundantly clear why growing money is so important. Money loses value over time. Let’s say you buried your savings in the backyard to keep them safe, and dug em up 20 years from now. That money would be worth much less than it is now. Its purchasing power would have diminished sharply. Growing your money is the way to stay even with inflation or you might even be able to get ahead of it. So you’re trying to maintain your purchasing power or perhaps even improve it so that you can afford in the future what you may not be able to afford now. The idea of saving for the future is not new, of course. King Solomon is credited with writing most of the Old Testament Book of Proverbs about 2,500 years ago. In one passage, he tells us what he has observed in nature. He writes that some creatures are small, yetextremely wise. He says ants are creatures of little strength, yet they store up their food in the summer. The ants are wise because they know there will come a time when food won’t be readily available, so during the summer, they set it aside they save for the future. In the New Testament, Jesus told two parables that employed the idea of putting money to work and generating a return. In each parable, servants are entrusted with a certain amount of money, and they are expected to take actions that will make it grow. Now, of course, Jesus isn’t just giving a lesson in personal finance or investing. His parables make larger points about stewardship and accountability. But I think we can conclude from the parables that putting money to work to earn a return in anticipation of the future is wise indeed. In fact, it is one aspect of responsible stewardship. Now, what should you do with your money to make it grow? Well, that depends on several factors. One of the most important is your time horizon that is, how long will it be before you need the money. Saving for a household project that you hope to start in 2025 is quite different from saving for a retirement that you expect to begin in 2055. For shorter-term needs, you can’t afford to take as much risk. That means, for most people, that the best options right now are going to be things like a savings account with an online bank online banks tend to pay higher rates or perhaps bank CDs, or certificates of deposit. A great option right now is the i-Bond, a U-S government bond that’s paying almost 10 percent far beyond any other savings vehicle. The downside is that you’ll have to tie up your money for a while and pay a penalty if you make an early withdrawal. For longer-term needs, such as retirement, the best option for many employees is their company retirement account. If you don’t have access to one of those, you can open an IRA an individual retirement account with a brokerage firm or a bank. As for what particular things to invest in, it’s probably best to stick with high-quality mutual funds because most are diversified they hold stocks from many companies. That helps protect your overall portfolio from the wild swings that occur with individual stocks. The advice of Ecclesiastes 11:2 is well worth heeding. It says: Divide your investments among many places, for you do not know what risks might lie ahead. Diversification is less critical when saving for shorter-term needs because the risk level is significantly less. Whether you’re saving for the shorter-term or the longer-term, or somewhere in between, here’s something that applies across the board: The best time to start is now. The longer you save, the better off you’re likely to be because time is a crucial factor in making money grow. Well, we’re out of time for this segment on growing your money. I trust it was helpful. On today’s program, Rob also answers listener questions: ● How should you balance paying off your mortgage with investing? ● When is it wise to refinance your mortgage? ● How do you deal with a family member who is making unwise financial decisions? Remember, you can call in to ask your q...