Grow Your Financial Skills at Home using LifeCents!  

Building assets that increase in value over time is an important component of building financial fitness.  As an initial component of asset building, the financial challenge measures increases in savings and investing as a factor for success. 

Why Save?
According to a study by the Consumer Federation of America, people with savings even as small as $500 can experience significant benefits such as:

·         Fewer penalty and late fees
·         Improved credit score
·         Improved housing stability
·         Improved health and sleep

Types of Savings
Emergency Fund: Provides a safety cushion for unexpected expenses such as a job loss, accidents and uninsured damages.  Emergency savings is your first layer of financial protection and works together with insurance to provide for losses beyond what your budget could support. 

Periodic Expense Fund:  Is for predictable expenses that don’t occur monthly.  Examples include car maintenance, back to school supplies, moving expenses, holidays and special events.

Goal-getter Fund: Is tied directly to your goals detailed in the goals section of  your Passport.

Investments:  Can include long-term goals like retirement funding.   Investments typically have risk associated with them in exchange for the opportunity for a higher return.

ROTH IRA vs. Traditional IRA

Individual Retirement Accounts (IRA) are retirement savings set apart from your employer.  These accounts can be set up at almost any financial institution. Both forms of the IRA are great ways to save for retirement, although each offers different advantages.

The biggest difference between the Traditional and Roth IRA is the tax treatment.

Traditional IRA example
If you earn $50,000 a year and put $2,000 in a traditional IRA, you will be able to deduct the contribution from your income taxes (meaning you will only have to pay tax on $48,000 in income to the IRS).  There are penalties for removing your money prior to age 59 ½.   At 59 1/2, you may begin withdrawing funds, but will be forced to pay taxes on both your investment and its earnings.  This is a tax-deferred retirement savings account; in other words, taxation is delayed until withdrawal.
Roth IRA example: 
If you put the same $2,000 in a Roth IRA, you would not receive the income tax deduction. If you needed the money in the account, you could withdraw the principal at any time (note: you will pay penalties if you withdraw any of the earnings your money has made). When you reach retirement age, you can withdraw your funds tax free.  You pay taxes on the initial investment because you don’t get any reduction of income at tax time, but the growth in the account is 100% tax free.
How Much Should I Save for Retirement?
Use the Ballpark Estimate at to estimate the monthly savings needed to provide for your retirement needs. 

Waiting to Save:
Research has shown that beginning savings early in life allows you to accumulate the most wealth with the least amount of impact on your monthly spending plan.  Waiting can put you at a financial disadvantage compared with someone in their early 20s who makes retirement savings a priority.

Example 1:
At age 20, you decide to invest $2,000 per year in a retirement account and earn 10% on your investment.  You invest for 10 years and make your last contribution at age 29.  You retire at age 65 with more than $1.3 million with only a $20,000 contribution!

Example 2:
You wait to invest in your retirement until you are 30.  You invest $2,000 per year in a retirement account earning 10%.  You continue to invest throughout the remainder of your career until retirement at age 65.  You contribute $70,000 and accumulate approximately $598,000.

Cost of waiting in these examples is over $700,000!

If you have waited to begin retirement savings, consider using any lump sums received from taxes and bonuses to “catch up” and get back on track for your retirement goals.

Virginia 529 Program College Savings:  
Virginia 529 has a number of savings programs to help you avoid costly student loans and establish tax advantaged savings for education for yourself or for those you love.  This is a great way to provide educational opportunities for your children or grandchildren.  To learn more, visit

Virginia Individual Development Account (VIDA):  
Fast track your success with VIDA.  VIDA offers matched savings of $2 for every $1 saved toward education, home ownership and small business development.  Income limits apply and you must be actively employed and saving regularly.  To learn more, contact Brendan Vigorito of Money Management International ( (866) 702-4172) or Willard Pretlow of STOP Organization ( (757) 858-1371).

Bank On Website:  
A resource for asking questions, getting worksheets and materials and staying informed of the latest news for Bank On.  Visit  for more information.

Virginia Saves 
Virginia Saves is a savings campaign to encourage you to build savings and reduce debt.  Join the league of savers and get great strategies for accelerating your savings plan.

Ballpark Estimate 
Find out how much you need to save to meet your retirement needs.  Interactive webpage allows you to put in current and future expenses, estimated investment return and expected social security to determine monthly savings needed for retirement.

My Money 
My Money is a one-stop shop for financial information on virtually any financial topic.  It is organized to point you to the array of financial educational resources available through the federal government.   Information includes free resources for education, credit, scams, debt collection, identity theft and money management. 

From Financial Planning Association:
Starting Your Financial Plan: A Beginner’s Road Map
Financial planning starts with setting goals and this free guide will help you get started.

Budgeting: Managing Your Money with a Spending Plan This guide explains how a simple budget can help you take control of your financial life, get better use of your money and achieve your financial goals.

Financial Planning: Secure Your Retirement
This free guide offers suggestions from financial planners on how to take a big picture, financial planning approach to your retirement plan.

Planning for the Stages of Retirement
This brochure addresses various stages of retirement planning, from starting out in the work world to retirement, in order to help you achieve your dream of a comfortable, fulfilling, financially secure retirement.

Articles and Tools:

Mutual Funds

Questions Investors Should Ask

No comments:

Post a Comment