Briefly explain the alternative form of payment that you researched and how it works as an alternative to traditional cash.
Discussion 1 Topic
It has been said that compound interest is “man’s greatest invention.” The sentiment is very much true. More wealth likely been created through the concept of compound interest than any other mechanism. Famous financial advisor Dave Ramsey Links to an external site.often illustrates the power of compound interest through the story of Ben and Arthur.
Ben starts saving $2,000 a year ($165 a month) at age 19, stops saving at age 26, and never saves another dime. His brother, Arthur, starts saving the same amount later—at age 27—but saves until age 65, almost his entire life. Ben saved for 7 years and Arthur saved the same amount for 38 years. With a 12% rate of return, guess who came out ahead at retirement?
The answer is Ben would have $2,288,996 while Arthur would only have $1,532,166. Ben has nearly $750,000 more money even though he saved for 31 years less than Arthur, all because he started at a younger age and compound interest had more time to grow the investment.
To check your status, it is generally accepted that you should be meeting the following benchmarks to retire by age 67:
By 30: You should have the equivalent of your salary saved
By 40: You should have three times your salary saved
By 50: You should have six times your salary saved
By 60: You should have eight times your salary saved
By 67: You should have 10 times your salary saved
What this means is the younger you can get started investing for retirement, the better. In this chapter we have discussed the various forms of investments, from bonds, to stocks, to mutual funds. Consider the benefits of each type of investment as you respond to the discussion questions.
Questions
Answer the following:
Assume that you are meeting the benchmarks described above, which means you have the equivalent of your annual salary saved by age 30 (or 3 times your salary by age 40). How would you invest that money to make sure you are on track to retire? Would you use bonds, stocks, mutual funds? Provide a rationale for your choice?
What challenges do you feel prevent young people from saving? What can you do to overcome those challenges?
Discussion Topic
How much cash do you have on you right now? Check your wallet, purse, and pockets, and see what you have. Do you have enough to make change for a twenty-dollar bill? Not so long ago, you could ask a roomful of people that question, and most folks would have the cash on hand to make change. These days, it’s less common. Think about the last five or six purchases you made. Did you pay with cash? Chances are good that you used a debit card or a credit card instead. Consider the possibility that someday debit and credit cards will disappear, too.
Technology has had a profound impact on our view of the necessity of cash. As we move towards a “cashless” society, the banking system is also challenged to adapt its processes and the services it provides.
Go beyond what you learned in the course module, and research some of the forms of “virtual currency” or cash alternatives that are currently available to consumers. Some of these include digital currencies, EFT, ACH transactions, iPay, Google Wallet, ePayments, direct draft.
Answer the following:
Briefly explain the alternative form of payment that you researched and how it works as an alternative to traditional cash.
What are the advantages and disadvantages of this form of payment?
As a consumer yourself, do you use any forms of cash alternatives? Which ones? Do you have concerns about the security of this payment method, and if so, what can you do to mitigate these?
Discussion 3 Topic
As we have learned in this chapter, undercapitalization is the number one reason why businesses fail. Simply put, undercapitalization means the company does not have enough money to survive during times when revenue (income) does not meet expectations. Two of the primary ways that companies raise capital is through either debt or equity financing.
Debt financing is when a company borrows money to be paid back at a specified future date, and a specified interest rate. Equity financing, on the other hand, is the process of raising capital through the sale of ownership in the company (most commonly through stock). Imagine you have a small business that you anticipate will grow quickly, and you need to raise money. Consider the pros and cons of debt financing and equity financing as you respond to the discussion questions.
Answer the following:
If you were looking to raise money for your small business, would you choose debt or equity financing? Justify your choice with specific reasons.
Reflection for the Career Research Paper:
Select one of the questions below and write a reflection on the e-Portfolio assignment you completed a few weeks ago. Please post the link to your e-Portfolio so I can read and grade your reflection.
What did you learn by creating the signature assignment? Be specific.
What are the strengths and weaknesses of your signature assignment? Explain while making specific references to your work?
What problems did you encounter in completing the signature assignment? How did you troubleshoot them, if you did?
