Financial Accounts May affect Your Financial Future

Financial Accounts are important to the Future

The Effects of different Financial Accounts

Your financial future is important to you and your family's survival in everyday life. It is never too early to start planning for the future. Began by teaching your children at an early age financial education; it took you years to learn through costly mistakes or just pure wasted time that could have been spent building your legacy.

There are so many young children opening businesses at an early age because when they come to their parents with an idea, their parents don't dismiss it. Teach yourself and your children what you need to do to achieve the wages you desire.

The amount of money you will make will depend on:
  • Your education level
  • The type of work you choose
  • Where you choose to live in the world

You also need to know what to do with those earning from that business, so you can be able to take those vacations; meanwhile, live a nice retired life in the future. There are a variety of effects on how your life can be lived during retirement and now when you invest in the right type of financial security for you and your loved ones.

Types Of Financial Goals

Saving For Short Term Goals

When you are saving for short-term goals, make sure you put your money in accounts that are liquid ( easily converted to cash) and safe from risk. If you desire to liquidate a certain amount of money on a particular date, you may not want to invest it in stock because it fluctuates in value. 

The $1000 you put in stock may have increased or decreased on that particular date. Of course, you hope it increases, but you don't know what it will be at the time you desire to withdraw. So if you are saving for something you need now or in the next few years, make sure it's liquid.
money goals
Short Term Goals

Saving For Long Term Goals

If you are saving for long-term goals, it doesn't have to be as liquid because you're not planning to use that currency anytime soon; therefore, you may choose to take a little more risk, which tends to pay higher rates. 

You may decide to invest in stocks or other long-term investments for your retirement future. Take your time and weigh out the pros and cons of your particular situation, and begin to make your decision.

Transaction Accounts

Saving Money
Saving Money

Transaction accounts are savings, checking, and money market accounts. It is available to the account holder on demand for immediate access. Money left in a transaction account doesn't tend to earn much interest. It tends to earn less than money invested in other types of financial assets. 

Accounts; such as a savings account, can be valuable when you need to save for a short period of time and get money out for a car, vacation, or an emergency fund without the risk of the value going down.

Transaction Account

Certificate of Deposit

A CD is a certificate of deposit in which money is deposited at a bank for a certain amount of time. The time can range from 6 months to years. 

Certificate of Deposit has a
  • Fixed-rate of interest
  • Higher interest rates are usually given for the longer the money is deposited.
  • Penalties are given for the early withdrawal of your CD finances.
Money should only be deposited in a CD if you are looking to keep it for a long time investment. Usually, the interest rates are higher than a regular saving account.  It is a safer way to save money without the fear of losing it if things go wrong.

What are Bonds?

Bonds are a way of saving; meanwhile, lending your money to another company with the intention of gaining interest from that company. Bonds pay you a certain amount of interest and your face value amount at maturity. Borrowers issue bonds to raise money. 

There are a variety of types of bonds; such as 

  • Municipal Bonds: Issued by government entities; such as a state or local government.
  • Corporate Bonds: Issued by public and private corporations in order to raise financing for a variety of reasons.
  • Investment-Grade Bonds: These bonds tend to have a lower risk and receive higher ratings from credit rating agencies.
  • High-Yield Bonds: These bonds have a lower credit rating but pay higher interest rates because they are riskier. They are more correlated with the stock market.
  • US Treasury Bonds: Issued by U.S Department of the Treasury.

According to Dynamic post
"Treasuries are considered the safest bonds available because they are backed by the “full faith and credit” of the U.S. government."

According to Investor.govInvestors buy bonds because:

  • They provide a predictable income stream. Typically, bonds pay interest twice a year. 
  • If the bonds are held to maturity, bondholders get back the entire principal, so bonds are a way to preserve capital while investing.
  • Bonds can help offset exposure to more volatile stock holdings.

Stock market
Stock market

What is Stock?

When you have stock, it's like owning a fraction of the corporation. It is a type of equity.

Basic stock market activity is generally classified into three categories:
  • The secondary market is when a previously issued stock is bought and sold.
  • The primary market is the market that firms sell new stocks and bonds to the public for the first time.
  • The initial public offering (IPO) market; the primary market is when a privately held corporation raises funds by issuing stock to the public for the very first time. It is also called going public.

What are Mutual Funds

Mutual funds are investment companies that use funds from savers to purchase different types of financial assets; such as, stocks and bonds. Since the organization pools the investor's money, they reduce the risk through diversification. There are hundreds of different types of mutual funds to help meet almost any financial goal. According to Investopedia,
"At the most basic level, there are three flavors of mutual funds: Those that invest in stock (equity funds ), Those that invest in bonds (fixed-income funds) Those that invest in both stocks and bonds (balanced funds), and those that seek the risk-free rate (Money Market Funds). Most funds are variations of the theme of these three asset classes."

Transfer Payments

Transfer payments are money you didn't work for and also don't have to pay it back. One example is a gift given to you by your relatives. Student grants are also considered as transfer payments since you didn't work for them or have to pay them back; unlike student loans that have to be re-payed.

According to Business Dictionary, 
Transfer Payments is a "One-way payment of money for which no money, good, or service is received in exchange. Governments use such payments as means of income redistribution by giving out money under social welfare programs such as social security, old age or disability pensions, student grants, unemployment compensation, etc. Subsidies paid to exporters, farmers, manufacturers, however, are not considered transfer payments. Transfer payments are excluded in computing gross national product."
So however you decide to invest in your future, make sure you do your research and start as early as you can. You can even read up on note investing for more ideas. Have a great day investing in your family's future.


 Alternative to Overdraft Fees and High-Interest Loans

Author: Arica  Green (Arica G) is the Founder and Editor of  Inveigle Magazine. She created a premiere Lifestyle, Fashion, and Beauty Magazine to entice you towards positive change and increase your quality of life. With Arica's love for writing and informing the Universe about a variety of topics, Inveigle Magazine was born. Follow us @ Inveiglemagazi1 & on FB . View more articles by Arica Green

 Inveigle Magazine 

Arica G

Arica G. is the founder and Editor In Chief of Inveigle Magazine and Inveigle Magazine Podcast.

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