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MoneyWi$e: Investing for Everyone · Talking FACS

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  Welcome to Talking FACS, what you need to know about family,
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  food, finance, and fitness.
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  This nationally recognized, award-winning podcast is hosted by the University
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  of Kentucky Family and Consumer Sciences Extension Program.
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  Our educators share research knowledge with individuals, families,
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  and communities to improve quality of life.
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  Welcome to MoneyWi$e on Talking FACS. where we share information you can use
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  to strengthen your family, your community, and our state.
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  I am your host, Mindy McCulley, Extension Specialist for Instructional Support,
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  and we are housed in the Martin-Gatton College of Agriculture, Food, and Environment.
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  I am so pleased to have with me two guests today,
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  Kelly May, who is our Extension Associate for Family Resource Management,
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  and Barbara Breutinger, who is interning with Family Resource Management this summer.
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  Thank you for having us. We're so glad to be here.
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  Investing is for everyone. And that's so exciting to me because it doesn't matter
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  if you're five or 95, you can begin investing.
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  Is investing the same as savings?
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  Well, that's a great question because savings is a good thing.
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  But it is not the same as investing.
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  And I say that because you can think of savings more as putting your pennies in a piggy bank.
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  So you're saving for a piece of candy or a new bicycle or a vacation,
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  whatever the case might be.
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  And you put those pennies in that piggy bank until you're ready to bust it open and spend it.
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  So you're not really earning interest on that money that you're setting aside for that savings goal.
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  But when you invest, you're actually putting it into a vehicle where you can
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  earn interest, and then you can also earn interest on the interest that you're earning.
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  And so it multiplies much quicker than savings.
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  I like that you said you put it into a vehicle. If you look at savings versus
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  investing, if your vehicle's on a flat road, that's savings.
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  But if it's on a mountaintop, that's investing because as it starts going down
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  that mountain, it picks up speed, right?
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  And that's just what investing does. It goes down that mountain and it gets
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  bigger and bigger and bigger or faster and faster and faster.
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  That's a good analogy. Kelly, when we think about the difference between savings
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  and investing, why should we choose one over the other?
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  Well, Barbara just mentioned compound interest, and you just mentioned the car on the road analogy.
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  And I think we think of interest very commonly with credit cards, and that's in a bad way.
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  So that would be like your car is driving down in a hole, right?
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  So that interest adds up quickly. We know if you keep a balance on your card,
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  as you work to pay it off, you have to pay the interest as well.
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  Well, investing is the opposite. It's driving up that mountain where you're
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  saving, and that interest is building in your favor.
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  So it works in the same way, but it works in the opposite way,
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  and it's to your benefit. So you want to take advantage of that compound interest.
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  And if you want to find out more about compound interest, you can look at our
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  past MoneyWi$e issues because we have some that help describe it some more.
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  That is exactly right. And we always love on this show that we talk about all
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  kinds of different things. And you can always find all of those old MoneyWi$e
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  newsletters on the MoneyWi$e site.
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  So, yeah, go back and look at those up. If I don't have a lot of money, can I afford to invest?
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  You definitely can afford to invest, and I would highly encourage it.
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  So, the one thing that we do recommend is that you have your emergency fund set up first,
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  and that is a savings type of account where you would have three to six months
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  worth of your expenses set aside in case there was an emergency.
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  So let's say you lost a job, you would have a way to pay your rent or your mortgage
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  and buy food while you're looking for a new job.
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  That's a good example of what savings can be used for.
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  But then once that is in place, you want to try to put every extra dollar you have into investing.
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  So it doesn't have to be $500 a month. It can be as little as $1 a month.
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  But if you do it on a regular basis, then soon you will see the fruits of those labors.
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  Well, and as I said at the beginning, it doesn't matter if you're 5 or 95.
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  The earlier you start saving, the more rapidly you're going to see that money
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  grow, right? That is correct.
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  How do we get started? If we've never been involved in any type of investing,
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  how can we get started with moving beyond savings?
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  So check with your job first. Most employers, a lot of employers,
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  offer a retirement plan such as a 401k or maybe a different type of account.
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  And if they do, start contributing as much as you can with each paycheck.
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  And so a lot of times you can split your paycheck where a little bit goes to
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  your investment account or your retirement plan, and then the rest of it will
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  come to you to pay your bills and do all the things you need to do.
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  So your employer can do those deductions for you and put that into a brokerage account.
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  And some employers even match your contributions. And so if they offer a match,
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  you definitely want to take advantage of that because that is free money.
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  So let's say you put in a dollar and they add a dollar to match yours.
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  That's an extra dollar of free
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  money. So you want to maximize that benefit if that is offered to you.
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  Also, investment accounts can have tax benefits depending on the type of account.
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  And once that money is in your brokerage account, you can decide what to purchase.
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  So there are different types of investments like stocks and bonds,
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  mutual funds and exchange traded funds and annuities.
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  So there's lots of different things to choose from.
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  And you can start with something simple. You can choose a few different things.
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  You want to make it diversified. We say, have more eggs in your basket so that
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  if one of those eggs gets broken, the rest of your basket's okay.
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  And just do what you can to try to beat inflation.
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  So we know that savings rates aren't as high as inflation rates.
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  And so that's why we want to go for investing because hopefully we can get a
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  really good interest rate that's over three or four percent.
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  Sometimes investments can get eight or nine percent or even more, 10 or 20 percent.
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  So it just depends on what you choose. And there are many professionals available
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  to help if you feel like you need assistance.
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  And I think the longer that you do it, the more comfortable that you will become
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  with seeing how your money grows and dips sometimes because you do have to become
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  aware of something called risk, don't you?
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  Yes. So risk is important to think about.
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  We all have a different comfort level with risk. Some people can handle a little more risk than others.
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  Some people begin to panic when they see those things fluctuate.
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  And that's what we call our risk tolerance.
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  So that is just your ability and willingness to lose some of the money you put
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  in. So there's no guarantees in investing.
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  But over the long run, many investments have done well.
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  And if you buy and hold, you know, if you put that money in and wait, it usually will grow.
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  That is an important thing to note. you're not going to put money in an investment
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  account and take it out next year.
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  It is there for a long term and not for a short term.
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  And that's why Barbara mentioned at the beginning, savings is for something
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  small or something short term.
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  So if you're going to buy a bicycle or you are going to even buy a car,
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  you probably are going to put it in a savings account as opposed to in an investment.
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  Can I wait until later to invest for retirement?
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  Well, you can, but we don't recommend it.
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  I am old enough to collect Social Security, so this would not be a great time
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  for me to start investing.
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  However, if someone is my age and hasn't,
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  There's nothing that stops them from starting right now, if that makes sense.
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  So let's say you're 60 years old, and you may live to be 90 or 100.
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  So if you start investing now, some of those investments will have 30 years to grow.
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  So it's never really too late to invest.
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  However, the earlier you start, the better, because time is definitely on your side.
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  There's something called the Rule of 72, which tells us the amount of time that
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  it takes an investment to double.
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  So let's say I put $100 in my investment account and I'm earning 9% interest.
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  That will double in about eight years.
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  So it's up to you to decide how many doubles you want.
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  If you only want one double, you can wait for a while. But I'd like to have
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  as many doubles as possible.
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  Well, before we wrap up, Any last tips for our investors, whether they're new
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  to the game or have been investing for years?
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  Yes, we talked about people that are at work and checking with their company
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  to see if there is something available to them.
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  But even if you're unemployed or if you have other types of income,
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  there may be a way for you to invest.
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  There are different types of accounts other than 401ks. but you do have to be
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  careful because some of them do require that you have earned income in order
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  to invest in those accounts.
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  So if you don't have the opportunity to invest through work,
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  then I would highly recommend that you speak to a financial advisor or someone
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  at that brokerage account that knows which types of vehicles you're allowed to use.
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  And we should also mention that if you do find yourself unemployed,
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  don't go to your 401k first to take money out because there are penalties if
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  you don't meet a certain age requirement.
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  There might be another place to pull money before you go.
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  Yes, that's correct. And again, that's another main difference between your
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  savings and your investing.
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  Your saving is there to be used for
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  the things that you need or maybe the unexpected expenses that come up.
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  Your investments, you want to let them sit and park and grow until you are using
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  them, say, for retirement.
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  And then you only pull out the portion that you have planned to use at that
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  time, and you continue to let the rest of it grow.
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  Exactly. Barbara and Kelly, thank you for investing this time with me.
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  That's a good one. And if you are just tuning in, you're listening to MoneyWi$e
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  on Talking FACS, and you can find us here the first week of every month,
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  wherever you listen to your favorite podcast.
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  Thank you for listening to Talking FACS. We deliver programs focusing on nutrition,
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  health, resource management, family development, and civic engagement.
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  If you enjoyed today's podcast, have a question, or a show topic idea,
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  leave a like and a comment on Facebook at UKFCSEXT, or send us an email at UKFCSEXT@UKY.edu.
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  Visit us online at fcs.uky.edu to learn more about the University of Kentucky
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  Family and Consumer Sciences Extension Program or contact your local Extension
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  agent for Family and Consumer Sciences.
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  We build strong families. We build Kentucky. It starts with us.
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  Music.