The assessment approach of this module is formative. This means your final grade will be based on information gathered from your performance throughout the module, rather than a single end-of-module test or paper. Your performance will be measured using many data points that are generated as you complete activities and assignments throughout the module. Using CGScholar, you will engage in online dialogue with one another to discuss and react to a discussion prompt at the end of each update and be responsible for posting your own updates each week. The data from your activity will be captured and visualized in Analytics, which allows you and your teacher to see on a daily basis where your progress stands.

The learning module includes a peer-reviewed project. Peer review is an excellent tool that encourages you to thoughtfully and constructively evaluate the work of your classmates based on the criteria provided by a rubric. You will be asked to provide specific comments on what aspects of the work are done well and what needs improvement. If the teacher is the only person reading your work, you get feedback from only one perspective. When multiple peers review your work, you benefit from sharing in the collective knowledge and experiences of others. You will also review your own work after you have revised it based on the feedback from your peers. Contributing peer feedback helps you improve, and understand how to improve, your work. Peer review data will be fed into Analytics. Be sure to check your Analytics page frequently to track your progress on the course requirements and to monitor your performance metrics. A sample "Aster Plot" for this course is included below. The wedges of the plot will fill as you complete required activities.

The formative assessment approach results in a final grade that reflects the full range of your knowledge, focus, and how helpful you were to your peers. These three areas -- knowledge, focus, and help -- are the main categories of how the course analytics are organized. Knowledge is demonstrated by the quality of your work, the peer reviews, and the self-review. Focus is demonstrated by your attention to the required activities and assignments and their specified elements. Help is demonstrated by writing updates that raise the interest of your peers and by your contributions to the peer review process.

As seen in the sample Aster plot below, each area is further sub-divided into a variety of categories that correspond to the many different ways in which your activity and performance is captured throughout the module. This approach produces a more holistic view of your learning journey throughout this module.

(Jessup, 2020). Screencap of sample Aster plot for this module.

For more information on working in Scholar, see: CGScholar Tutorials and Getting Started in Scholar learning module.

At the conclusion of the module, you will be able to:

• Determine personal values and financial goals
• Create a financial plan
• Summarize the purpose of financial planning
• Describe how savings affects well-being
• Explain compound interest
• Differentiate between simple interest and compound interest
• Identify and research savings products
• Explain how interest is computed on savings
• Identify the costs of college
• Discuss student loan management
• Research and compare different college financial aid choices
• Discuss the earning potential of a degree in relationship to its cost
• Identify the costs of college
• Understand how the economy impacts personal financial choices
• Summarize monetary and financial policy
• Understand inflation and economic cycles
• Understand how investing helps meet financial goals and builds wealth over time
• Research and evaluate investment vehicles and resources
• Explain how investments are regulated
• Explain how investments can be impacted by economic and business cycles
• Explain how long-term retirement savings through investing builds wealth
• Identify differences in retirement planning strategies
• Create a retirement plan

Anticipated Duration to Complete Module and Material Requirements

The learning module consists of six updates and a project, and will take approximately seven weeks to complete. You will need a computer or mobile device with access to the internet in order to access the material on CGScholar and participate in the activities and assignments.

Instructions

Create an infographic appropriate for a high school aged student about a topic related to the course. What did you learn that you would like to teach to a friend or family member? You could pick something that falls within the topics we have discussed, or, come up with another topic that we did not discuss but would fit within this subject matter. You can create your infographic using PowerPoint, Google Slides, or any other program as long as it is able to be shared. Final projects will be displayed in the hallway for the rest of the year.

Your infographic should include:

• A headline
• At least one statistic
• A minimum of three pictures
• Descriptive text
• An accompanying reference list of at least 3 sources, formatted in APA style

Your infographics will be submitted via Creator on Scholar for peer review after the last lesson. Peer reviews will take place during the following week. You will be expected to review the projects of two of your classmates and provide constructive feedback to help them improve the quality of their project. Peer reviews will be conducted using Creator on Scholar. When your peer-reviewed work is returned, you will have one week to revise it based on the recommendations of your peers. You will also review your peer reviewers, providing them with feedback on their review of your work. Finally, you will conduct a self-review using the project rubric and submit that along with your final revised version. You will see the rubric in Scholar when you receive the notice to begin the project.

Peer reviews and self-review guidelines

• Complete two anonymous peer reviews of the project with a minimum of 5 comments/annotations and a minimum of 100 words in the overall review.
• Submit feedback on feedback reviewing the reviewer, minimum of 100 words
• Submit a self-review of the revised project (using the project rubric) including an explanation of the peer feedback you took on, minimum 100 words for the review.

Before you read any further, please take the survey!

Intended Learning Outcomes

• Determine personal values and financial goals
• Create a financial plan
• Summarize the purpose of financial planning

SETTING GOALS

What's the importance of goal-setting? Life is filled with opportunities and choices. Determining your priorities and setting goals to achieve what you want is a helpful approach to deciding where to expend your time, effort, and money. When it comes to personal finances, setting goals can help to guide your choices about spending, saving, and investing. For example, if you have set a goal to drive across the country before you are 25, you can make plan for how much time it will take, estimate your expenses, and save accordingly.

The video below discusses the importance of setting goals and explains the SMART framework for goal-setting. SMART stands for Specific, Measurable, Attainable, Relevant, and Time-Bound. How do you think these five terms relate to setting goals?

(MindToolsVideos, 2014)

SMART GOALS: PRACTICE

Complete the handout on setting a SMART savings goal and come to class prepared to share and discuss.

(Consumer Financial Protection Bureau, 2018). Setting a SMART savings goal.

HAVING A PLAN

Life is also filled with unexpected events and expenses. Your company may close or relocate. You might have a serious medical issue. You may need to provide financial support for a loved one. You might have to replace your car engine. Having a financial plan can help make these events easier to navigate. You might also unexpectedly receive money, like a bonus from your employer. When you have a financial plan, you can look at your goals and decide how best to allocate your windfall.

The elements of a polished financial plan are:

• budgets and income expenses
• makes a plan for spending, saving, and investing
• weighs wants and needs
• avoids peer pressure
• limits expenses when necessary

A budget is key to managing your spending and savings. Tracking regular expenses, like a monthly cell phone bill, helps you know how much money you are obligated to pay out for goods and services. It is important to include discretionary spending in your budget. Discretionary spending is money you spend on "fun" things like eating out at a restaurant or entertainment. Your budget should also include an allocation for savings, which can be thought of as "paying yourself." Even just a small amount makes a difference in working toward your goals. Having a financial plan can help you evaluate whether something is a "want" or a "need." You might need a cell phone, but want Netflix. A financial plan helps you stay on track when friends might try to pressure you to join them in a fun activity that exceeds your budget. Finally, if you find yourself in a situation where you need to temporarily cut expenses (for example, if you're hit with an unexpected bill, like car repair), you can use your financial plan to adjust your budget.

Check out this online budgeting tool from NerdWallet. Give it a try! There are different ways to divide up your spending and saving, but NerdWallet's 50-30-20 plan is a good place to start. This means you allocate 50% of your dollars on necessities, no more than 30% on wants, and at least 20% on savings and extra debt repayment. (Extra debt repayment means that you add more than the minimum required payment amount to a loan, which pays down your debt faster and saves money in the long run by reducing the amount of interest you have to pay.)

Make a comment: What is the purpose of creating a financial plan? What steps should you consider when creating a plan? How does a budget fit into a financial plan?

Post an Update: Identify a goal that you are willing to share with the class. Share your goal, and provide a plan that outlines the short-term, medium-term, and long-term steps needed to achieve that goal. How do these steps align with the SMART framework? Respond to the updates of at least two other classmates. Do you have suggestions or comments to help them improve their plan?

Learning goals

• Describe how saving affects financial well-being
• Differentiate between simple interest and compound interest
• Explain compounding
• Identify and research savings products
• Explain how interest is computed on savings

Last week you identified some goals and began to discuss the idea of saving for those goals. This week you will learn more about how to actually begin saving. This week's update focuses on the importance of savings and covers the concepts of paying yourself first, what is a rainy day fund, how compounding works, and identifies different types of savings products.

Concepts

Paying yourself first: This was mentioned in the previous update on financial planning. A key part of any savings plan is paying yourself first.

It helps to think about it this way because it makes you and your goals as much of a priority as paying a bill. In order to achieve the goals you set for yourself last week, you must commit to paying yourself. Before you pay bills or spend "fun" money, you should pay yourself first. This helps to manage money better because you're making an informed decision about how you are spending your money; it helps to save for the goals you identified and it allows you to have extra money for the unexpected -- bad and good.

Did you factor "paying yourself first" into the savings plan you created last week? If not, revisit your plan and consider how you can add it in.

Rainy Day fund: What is a rainy day fund? Rainy day savings are for unexpected emergencies, like a medical bill or car repair. This is a specific category of savings that should be part of your overall savings plan. Ideally, it's good to have savings set aside for emergencies and savings that helps get you closer to your goals. In fact, having a rainy day fund will help keep your goals on track when the unexpected happens because you will not have to go into debt or take away from the savings designated for your goals.

Interest: What's the deal with interest? This is a term you've probably heard. Interest is the money a bank will pay you for storing your money there, or it refers to the money you pay to a bank as a fee for borrowing money. Borrowing money can be in the form of a loan, or in the form of credit, such as a credit card. There are two types of interest: simple and compound. Most car loans, mortgages, and some student loans use simple interest. This means the interest is a fixed percentage of the initial loan amount (the principal) and it does not change as the loan balance changes. It's a fixed amount that is part of your monthly payment. Credit cards, on the other hand, utilize compound interest. This means that the dollar amount of the interest charged each month changes with your balance. The interest charge is added to your balance, which, depending on the amount of your payment, can increase the amount your owe over time because it makes your balance higher, which, in turn, increases the amount of the next interest charge.

To really understand how savings and investments work (including retirement accounts, which we will cover later), it's critical to know what compounding is. The following two videos describe how compounding allows your money to grow.

(TDAmeritrade, 2018b)

(Discover, 2017)

In today's economic environment, interest rates are extremely low. We'll talk about economic conditions in a later update, but for now, what you need to know is that a typical savings account is not going to generate much money, even with the magic of compounding because interest rates are so low. It's better to think about savings as a way to safely store the money you have rather than as a money-making tool. This is a good reason why you should also consider investing in addition to saving. We'll learn more about investing in a few weeks, and compounding does make a difference in investing.

How do you know what kind of savings account is the best one for you?

The graphic below identifies different types of savings instruments:

(Consumer Financial Protection Bureau, 2020). Safe ways to store your savings.

Which one of these options looks good to you? One thing to consider is how accessible your money needs to be. For a rainy day fund, you'll want to be able to withdraw your money when you need it, so a CD is not a good choice because when you deposit money in a CD, you agree to leave it there for a specified amount of time, which is also why CDs have slightly higher rates.

It's also important to know that your money is protected. The Federal Deposit Insurance Corporation covers all deposit accounts, including checking and savings accounts, money market deposit accounts, and CDs. This means that money deposited in insured financial institutions is guaranteed up to the maximum amount allowed by law ($250,000 per depositor, per bank) if the financial institution goes out of business and cannot pay you your money. Likewise, the National Credit Union Administration (NCUA) insures up to $250,000 per depositor at insured credit unions.

Make a comment: Reflect on what you've learned about savings. How do you think savings affects your financial well-being?

Post an update: Find a financial institution that offers some type of deposit account -- any of those listed on the infographic, or look into savings bonds. Name the institution and identify which type of savings account you are discussing. List the minimum deposit amount, the interest rate, whether the account is protected by an insuring agency (the FDIC or the NCUA), and explore whether there are any withdrawal penalties or fees for maintaining the account. Evaluate whether this would be a good savings account for your goals. Be sure to comment on the updates of at least two of your classmates. What questions do you have about the account they listed?

Learning goals

• Research and compare different college financial aid choices
• Discuss the earning potential of a degree in relationship to its cost
• Identify the costs of college
• Understand student loan management

One of the goals you've identified through the course of this module may be to attend college or another post-secondary institution. There are many factors that weigh into this decision, such as what career path you want to follow. Whatever you decide, you will need to understand how to evaluate the costs of college when you are weighing your decision.

College debt in the United States is about 1.7 trillion dollars and the average student debt is about $38,000. However, college graduates often have a return on their investment, meaning that even though the degree required time and financial resources, in the long run it allowed them to have more career options, higher earnings potential, and lower unemployment.

When considering a post-secondary education, it's important to know that a four-year school is not the only option. There are two-year colleges, vocational schools, and apprenticeship programs. Depending on the career you want, one of these types of schools or programs may be better than another. Whatever choice you make, though, you will still need to pay for it. And the costs aren't just tuition and room/board. The graphic below lists some other expenses that should be considered when factoring the cost of college.

(Ma, et al., 2020, p.11) Student budgets 2020-21.

What types of financial aid available to pay for post-secondary education?

• Scholarships: Scholarships provide money for college that you are not expected to pay back. They can be need-based or merit-based. Merit-based aid is given by universities to students who do exceptionally well on standardized tests and who have high grade point averages. Many schools, and the federal government, give need-based aid, which means they consider how much money a family has when determining a student’s scholarship. It is important to check each school’s financial aid office to see what type of aid is offered.
• Grants: Grants are money for college you are not expected to repay. These are usually based on need.
• Loans: Loans are money borrowed that must be repaid with interest. There are different types of loans: private and federal. Federal loans are underwritten by the government and tend to have lower interest rates and options for your payment amount and schedule.
• Work-Study Programs: Your financial aid package may include a work-study award, which means you will be given a part-time job on campus to help pay for your educational expenses.
• Your financial aid package may consist of a combination of these options, as well as an expected family contribution. That is the amount that is left uncovered by federal financial aid and must either be paid outright or, there are other loan options that you or you family may need to consider.

The video below from the federal government's student aid website explains the financial aid types.

(Federal Student Aid, 2012)

The process to secure financial aid begins with completing and submitting the FAFSA, which can be done online or on a mobile device.

This is a lot of information to take in! But it's good to know so you can plan accordingly and make an informed decision when the time comes.

Make a comment: Share a tip about how to prepare for college costs.

Post an update: Choose one post-secondary option (vocational, two-year college, four-year college or university, apprenticeship program). Provide a brief definition of the option and explain why it interests you. What qualifications, skills, and abilities are needed to pursue this option? How long is the education or training period and what types of credentials are earned? Describe at least two career options that are available as the result of this post-secondary choice, what the average salaries are, and what the typical workday looks like. Be sure to respond to at least two posts of your peers. What did you learn or find interesting?

Learning goals

• Understand how the economy impacts personal financial choices
• Summarize monetary and financial policy
• Understand inflation
• Understand economic cycles

This week we turn our focus to the economy. What happens in the U.S. economy (which can be influenced by factors outside of the United States) directly affects your money on a personal level. Earlier you learned about interest rates and how they increase your savings. But these numbers are not arbitrary. Interest rates of all kinds - credit card interest, mortgage interest, bank account rates - are influenced by the decisions made by the governing body known as the U.S. Federal Reserve, commonly referred to as the "Fed."

(Federal Reserve, 2016a)

In the video above, you learned more about what the Federal Reserve is. Some key points to remember:

• The Federal Reserve is the central bank of the United States
• It is comprised of a Board of Governors appointed by the President of the United States and confirmed by the U.S. Senate.
• There are 12 regional banks in the Federal Reserve system
• The purpose of the Federal Reserve is to enact monetary policies that fight inflation (keeping prices stable) and maximize employment, two factors that play a large role in keeping the American economy healthy

What exactly is monetary policy, and how does the Fed determine what actions should be taken?

(Federal Reserve, 2018)

The preceding video discussed how the Fed conducts monetary policy. Policy decisions are made by the Board of Governors and the presidents of the 12 regional Fed banks. This group is called the Federal Open Market Committee, and the readouts of their meetings are always made publicly available. Some key points to remember:

• Based on its assessment of the economic conditions, the Fed can either tighten monetary policy by raising its target interest rate, or, the Fed can loosen (or "ease") monetary policy by lowering its target interest rate.
• The target interest rate influences other major interest rates like mortgages and credit cards.
• When the Fed lowers the target interest rate, banks also lower their rates, which makes it cheaper for consumers to borrow money for major purchases (like homes or cars) and for businesses to borrow money to fund expansion or improvements
• Think of the Fed actions like adjusting the water flow from a faucet. When the economy needs more money flowing, the Fed opens the tap. When less money is needed, the Fed starts closing the tap.

When money is freely flowing in the economy (easy to lend, borrow, and spend), as tends to happen when rates are low, the economy is healthy - as long as unemployment also remains low. However, the economy is cyclical, meaning there are normal periods of growth and contraction. Another key piece to this puzzle is inflation.

(Federal Reserve, 2016b)

As explained in the video, inflation is the change in price of goods and services over time. Inflation is not tied to one particular type of good or service, but refers to the change in price across a broad range of consumer goods and services. But what causes inflation?

• An increase in production costs ("cost-push" inflation). This can happen when the cost of raw materials goes up or wages increase. If demand for the product is unchanged, but it costs a company more to produce it, the increase in cost is often passed on to the consumer.
• An increase in demand ("demand-pull" inflation). This happens when consumer demand goes up and supply cannot meet the demand. When the economy is healthy, money is flowing freely (such as when interest rates are low and employment levels are good), people tend to be confident in their spending, which can drive demand for products and services.
• Expansionary fiscal policy. Unlike monetary policy, which is determined by the Fed, fiscal policy is handled by the federal government. Fiscal policy is how governments manage the budget of their country (just like you would make a budget to manage your spending and saving.) Governments can cut taxes, which puts more money in the pockets of consumers, who then tend to spend it. When businesses receive tax cuts, they may spend the money on capital improvements, better benefits for employees, or new hires. All of these measures can result in higher consumer demand, which then pushes up prices.
• As discussed, the Fed can also affect inflation by raising or lowering its target rate. If the Fed determined that the economy was too overheated -- that is, there is too much demand, too much money flowing, and prices are rising too quickly -- they could raise the target interest rate, which would effectively slow down consumer growth and spending, allowing the economy to stabilize so prices do not go through the roof. Conversely, if the economy is slowing down too much, meaning that banks aren't lending and consumers aren't spending, the Fed can lower the targe rate to try to jump-start the economy. From time to time, the economy gets so sluggish that it goes into a recession.

(IMF, 2012)

As discussed in the video, recession is typically indicated by a period of significant decline (typically two consecutive economic quarters) in income, employment, industrial production, and wholesale and retail sales. Some key points:

• Recessions can be caused by events that shake consumer confidence on a broad scale. Right now, the United States is technically in a recession due to the effects of the coronavirus pandemic. Millions of people have lost their jobs and thousands of businesses have closed. People aren't spending money on goods and services (such as travel, restaurants, sporting events, concerts, and movies) the way they normally would. Demand has plummeted and companies have had to lay off employees.
• To get out of a recession, the federal government and the Federal Reserve must figure out the best way to use their respective resolution mechanisms in order to stimulate the economy and get people borrowing and spending again.

Make a comment: What prices have you witnessed rise or fall in your life so far? Are there items you used to buy at lower prices that are now more expensive? Why do you think the cost has gone up?

Post an update: How will economic conditions affect your financial decisions, such as whether to borrow money or make a large purchase? Find one reliable source of information about what is happening in the economy. What is the source and why did you choose it?

Learning goals

• Understand how investing helps meet financial goals and builds wealth over time
• Research and evaluate investment vehicles and resources
• Explain how investments are regulated
• Explain how investments can be impacted by economic and business cycles

Throughout this module, you've been thinking about what kind of life you would like to have and what goals are important to you. Investing is a long-term savings strategy that can put your money to work. Investing is a type of saving, but it is very different from the traditional kind of savings you learned about earlier in this module. Remember that traditional bank deposit accounts are protected from financial loss. For accounts with less than $250,000, either the FDIC or the NCUA insures your money, meaning that if the bank goes out of business, you won't lose your money. Investing has no such guarantee. It can be higher reward, but it is also higher risk. You could lose all or part of the money your investment earned and the initial investment principle itself. The investing space can be complex. There are a lot of different types of investment instruments that have different purposes and risk profiles, so it's a good idea to learn more about them and also figure out what type of investor you are (which we will work on in class.)

NOTE: You must be 18 years old in order to open any kind of investment account. But, your parent or guardian can open one on your behalf.

We'll be looking at three common types of investment instruments: stocks, bonds, and mutual funds. The videos below explain each in more detail.

Stocks

(TD Ameritrade, 2017b)

Key points:

• When you own stock, you own a piece of the company and become a shareholder.
• You make money from a stock when its price goes up (assuming the price is higher than when you purchased the stock) or if the company pays a dividend, which is a portion of its earnings passed on to shareholders.
• Stocks have unlimited upside (earnings potential) but also unlimited downside. It is absolutely possible to invest in a stock that later plummets in value.

Bonds

(TD Ameritrade, 2017a)

Key points:

• A bond is actually a loan given to a company, government, or municipality by investors, who then earn money on the loan. Average investors typically do not invest in individual bonds, but may invest in a fund that is comprised of a collection of bonds.
• Bonds are issued for a specified period of time and the loan is repaid at the end of the term
• Bonds are typically less risky than equities (like stocks) because they are secured by something
• Bond yields (how much interest is paid for holding the bond) vary, with higher yields typically paid by higher risk investments such as a corporate bond. This is because there is a higher risk in the bond issuer defaulting.
• Generally, government-issued bonds are considered safe bets, so their yields are lower, but there is less risk of losing your investment.

Mutual funds

(TD Ameritrade, 2018a)

Key points:

• Mutual funds and exchange traded funds (ETFs) are pooled investment vehicles
• Instead of picking individual stocks, bonds, or other investment types, you can invest in a mutual fund that may hold a broad range of different kinds of investments
• The advantage of a mutual fund is that it can help diversify your investment portfolio by spreading your investment across different sectors and investment types
• There are management and transaction fees
• When the fund's assets rise in value, so does the fund's share value (and vice-versa). Some mutual funds pay out dividends, which is another way an investor earns money from their investment.

Diversification is important because you don't want to have too much of one kind of thing in your portfolio. Spreading around the types of investments you have helps you to manage your risk. Mutual funds and ETFs can be a great way to diversify.

There are many other types of investment vehicles, such as ETFs, currencies, options, futures, and annuities. Some of these are quite complex so when assessing where to allocate your hard-earned resources, be sure to understand what you're getting into. Any type of security can be risky.

One final note is that all securities (including stocks, bonds, and pooled investment funds) are regulated either by the Securities and Exchange Commission (SEC) or a division of the Financial Industry Regulatory Authority (FINRA). These agencies provide oversight to ensure no one is breaking the law.

Make a comment: How does investing helps meet financial goals and build wealth over time? Why should you invest in addition to saving?

Post an update: Parse an investment vehicle you are interested in learning more about (it does not have to be one of the types we covered here.) Explain what it is and how an investor makes money from it. Are there any specific economic conditions that might affect the performance of this type of investment? What is an example of this type of investment? What is its level of risk? Be sure to comment on the posts of two of your classmates.

Learning goals

• Explain how long-term retirement savings through investing builds wealth
• Identify differences in retirement planning strategies
• Create a retirement plan

It may seem silly or even impossible to think about retirement this early in your life. But, actually, the earlier you start planning for retirement, the more time you have to put your money to work so you are financially secure when you are ready to retire and no longer earning income. Would you like to be a millionaire? It requires discipline, smart saving and investing, and well-developed financial plan but it's possible! Read this article about how average people become millionaires through saving and investing. What do you think? Could you develop those habits?

Compounding (Again)

Let's revisit compounding to see what a difference it makes to a retirement investment over time:

(Jessup, 2021) Money over time

Look at the difference starting early makes! Even if it's just a small portion of your paycheck - give your money time to grow. These numbers are also very conservative. It's very likely that as your income increases, you will have more money to contribute to your retirement account. The market yield number of 7% is also on the conservative side: the average historical market yield (based on the S&P 500) is 10%.

Types of Retirement Accounts

Just like there are a variety of investment vehicles, there are different types of retirement accounts. Where you work or if you are self-employed will determine what types of accounts are available to you. Below are two common types of accounts.

401(k) and 403(b):

• These types of accounts are almost identical, except that 401(k) plans are offered by for-profit organizations while 403(b) plans are offered by non-profit entities like schools.
• Some organization may offer a matching contribution - THIS IS FREE MONEY!
• Contributions can be made directly from your paycheck and are taken out before taxes. This is beneficial because it lowers the amount of money in your paycheck that is subject to taxes.
• Usually have fewer investment options than IRAs because the organization selects the funds the account will offer
• The IRS evaluates annually what the contribution limit is. For 2021 the cap is $19,500.

Individual Retirement Account (IRA)

• If your employer does not offer a 401(k) or 403(b) plan, you can open your own retirement account. These types of accounts usually give you more options for how you want to invest your contributions.
• Tax-deductible
• No employer match
• Contributions are made pre-tax, so you do not pay taxes on the money until it's withdrawn
• The 2021 cap on contributions is $6,000

In addition to these types of accounts, there are also defined benefit plans, which are pension plans, but these are much less common as organizations have moved away from them in favor of 401k plans.

As a young person, it makes more sense to look for fund offerings in your chosen retirement plan that are heavier in equities. They have much more upside than fixed-income securities (bonds) and, because of your longer investment timeline, you can weather ups and downs of the markets. Many retirement accounts offer Target Date Index Funds, which are funds that consist of underlying securities that are expected to generate a certain rate of return keyed to your target retirement date. These are "set it and forget it" investments that will automatically rebalance over time to balance risk and return as you age. The older you get, the less risky you want your investments to be.

Make a comment: Why should you start thinking about retirement now?

Post an update: A few examples of retirement account types were covered in this week's content, but there are more. Find another type of account and explain it's features. Who would be eligible for that type of account? What are the contribution limits? What's a good source of information to learn more? Be sure to respond to the posts of at least two of your classmates.