<p>Okay. So a lot of "financial" people come to my school and talk a lot about this equation. They say that if I donated $5000.00 to a savings account now ( I am 18). When I retired, I should have a million dollars. Is this by all means true? What about inflation? I am the first in my family to do these things so I don't know. What is a good interest rate to save? Also, are there any other factors that I should know about saving???</p>
<p>First...I am not a financial advisor. If I were going to invest any amount in long term savings of any kind, I would speak to a financial advisor...on a personal basis, not as part of a large presentation to your school. Second, more than likely the investment would not be put into a "regular" savings account. It would likely be put into a long term account...some kind of IRA perhaps ...or a mutual fund. You would need to check each type of account. In some cases, you really don't have access to the money without penalty until you are 59 1/2 years old (because they are retirement accounts). In other cases you would have access only for certain things. </p>
<p>Bottom line...you need to speak to someone on your behalf only before investing. AND you also need to be sure that you have the money for this long term investment. </p>
<p>Now having said that...we have advised both of our kids (in their twenties) to put money aside in some kind of long term account...even a small amount every month. And they have.</p>
<p>Well, I plan on speaking to a bank person, but I am scare that they might ripe me off...since they want to make money....i want to make sure that I have a clear head before I go to the bank.....</p>
<p>They were probably speaking about a roth ira. If you have earnings now you can open an account and contribute up to $4000 per year. The earnings grow tax free. If you just did 4000 and never touched it, it would be worth a lot of money when you retire. If you were able to put more in each year, even more so. It's a great way to earn a lot of money for the future. The trick is to deposit it and leave it alone. It's not money to be used for other things but the contributions may be taken out in an emergency and the earnings on the contribution may also be taken out if needed but they will be subject to federal taxes. Not many kids are thinking of retirment savings at 18 but it's the smartest thing you can do. I'm having my own do it when they turn 18. Maybe if you do it you won't be like many adults on this board (myself!!) who are wondering how to save for retirement and also pay for college. There are a lot of online calculators to figure out how much your roth ira savings would be worth 40 years from now! Search Roth IRAs online. There's a ton of information.</p>
<p>okay thanks.....I told my parents about it....and I ask them to give me 2000.00. I told them that I would save it up this way...and they agreed to give me money....:)....since i am going to school for free :)</p>
<p>One of my main concern is inflation...how will they calculate the unexpected inflation???</p>
<p>Yes, inflation may eat into some of the end result; one would assume that the buying power of $1 million may be less in the future. However, that's still $1 million you wouldn't have had before, that you didn't have to work for (once you've gotten the initial investment in hand). </p>
<p>So there is no downside to this plan; there's only an upside.</p>
<p>okay...so i just talk to a bank of america specialist.....</p>
<p>I am thinking about getting either the 5 or 10 year CD....(they are the same rate..(3.2)).....</p>
<p>my main concern is inflation...it seems like inflation is higher than 3.2???</p>
<p>also...so with the same rate...which one would you guys go for....5 year or 10 year..</p>
<p>You're 18? Talk to a stock broker or someone at a mutual fund like Fidelity or Vanguard. There is absolutely no reason in the world why you need to be as conservative as getting a locked-in CD. You can take a bit more risk with your money.</p>
<p>If you really want a CD, go for the 5 year.</p>
<p>You can't deposit money into an IRA unless you have earned income of at least as much as the deposit. So if you make $1000 this year, you can deposit $1000 into an IRA (regardless of the source of that $1000), but you cannot deposit $5000, nor even $1001.</p>
<p>And yes, there are limits as to how much can be deposited, as mentioned above.</p>
<p>ahhhhhh, since you are young, I suggest you look for an investment club, or form one yourself. Start with better-investing.org and go from there. College is great, but this kind of education will also serve you very well in life.</p>
<p>If you put 4,000 in a roth ira today (assuming you earn 4000 this year) and earn 6% on the account yearly it will be worth 69,510 when you retire at 67 even if you make no additional contributions. </p>
<p>If you put 4,000 in a roth ira today and contribute 1,000 each year till you retire and earn 6% yearly it will be worth $358,000 when you retire at 67. </p>
<p>if you put 4,000 in a roth ira today and contribute the max of 4,000 each year (probably will increase in the future) till you retire and earn 6% on the amount, it will be worth 1,226,854 when you retire at 67. </p>
<p>This is a great thing to start since you have time on your side. Starting at 18 is great even if you put it in there and leave it alone and start funding a 401k when you start working at your career. You cannot lose with a roth at your age.</p>
<p>icic...thanks...i definitely don't turn 18 until late june...so I have a month to ponder through it..thanks....</p>
<p>so..i see that most of you guys recommend a IRA...huh...thats interesting...</p>
<p>Let's hope inflation doesn't run over 6%! I'm scared of locking my money in because of the high core inflation recently. I don't want to go back to the hyper-inflation of the 70s.</p>
<p>well i think it all depends where you are on the business cycle...since it fluctuates so much. I would save during high inflation...and spend during low inflation :)</p>
<p>okay...so if I invest in a roth IRA...i still decide where i want to save it to : CD or bonds????...which one is better????</p>
<p>OP, follow Chedva's advice and talk to another financial advisor. You're too young to be going a CD or bonds at this point. You don't have to be 18 to start an IRA.</p>
<p>If you are not gainfully employed, it is possible (and legal) to earn money working for your parents. This is something where you really should talk to a financial professional, though.</p>