How Will Your Money Add Up? Directions: Go to the foundationsU com website and find the investing ca lculator under “tools.” Then use the investing calculator to complete these scenarios.

1
Select a financia l goa l, such as how much money you want to have when you retire or when you reach a specific age. Then calculate what you need to save now in order to reach your goal.
Goal Amount _________________________ I need to invest ____________ per month for ___________________ years at _______%.
2
Now determine how much money you would have if you invested “x” amount of money each month for 10, 20, 40 a nd 50 yea rs. Saving ____________ per month for 10 years will give me a lump sum of ___________ . Saving ____________ per month for 20 years will give me a lump sum of __________ . Saving ____________ per month for 40 years will give me a lump sum of __________ . Saving ____________ per month for 50 years will give me a lump sum of __________ .
3
Explain how spending less and saving more contribute to wealth building.
Note: You can modify the interest rate to see how that a!ects your return on investment. We recommend 12% for long-term investments.

1 answer

To effectively complete the scenarios you provided using an investing calculator, you will need to visit the foundationsU.com website. However, I can help you outline how to approach each scenario and what calculations you might consider. Here are the steps and examples to guide your work:

1. Financial Goal Calculation

Goal Amount: Specify how much money you want at retirement; let's say you want $1,000,000 by the age of 65.

Assuming a 12% interest rate:

Monthly Investment: Use the calculator to find the amount you need to save monthly to reach your goal.
Time Period: Define how long you plan to save, for example, if you're currently 30 years old, you have 35 years to invest.

Example Output:

Goal Amount: $1,000,000
I need to invest: $300 per month for 35 years at 12%.

2. Monthly Investment Over Different Time Frames

Now, decide on an "x" amount you would like to save per month and see how much it would accumulate over different time frames.

Example: Save $500 per month

For 10 years (120 months):
- Calculation (using a calculator): Saving $500 per month for 10 years will give me a lump sum of approximately $93,000.
For 20 years (240 months):
- Calculation: Saving $500 per month for 20 years will give me a lump sum of approximately $336,000.
For 40 years (480 months):
- Calculation: Saving $500 per month for 40 years will give me a lump sum of approximately $2,672,000.
For 50 years (600 months):
- Calculation: Saving $500 per month for 50 years will give me a lump sum of approximately $7,050,000.

3. Explanation of Spending Less and Saving More

Spending less and saving more are fundamental habits that contribute to wealth building in several ways:

Increased Savings Rate: The more you save each month, the more capital you will have working for you when invested. This allows for compound interest to take effect, exponentially increasing your wealth over time.
Financial Flexibility: By controlling your spending, you can create financial breathing room for emergencies, investments, and future expenses. This flexibility reduces the chances of going into debt.
Investing for Growth: The savings that you do not spend can be placed into investment vehicles (stocks, bonds, mutual funds) that have the potential to yield higher returns compared to standard savings accounts. Over time, the power of compounding can significantly increase your net worth.
Long-term Wealth Accumulation: Budgeting your expenses allows for consistent contributions to your savings or investment accounts. Regular contributions, regardless of the amount, add up significantly over the years due to compounding and investment growth.

By following the above methods, you will be able to clearly outline your financial goals and understand the importance of saving more and spending wisely to build wealth over time. Feel free to adjust the numbers based on your current financial situation and goals!