In this webinar, you’ll learn the best strategies to tackle both saving and investing in the years ahead.
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Good afternoon and welcome to today’s webinar, “Growing your money: saving versus investing.” My name is Courtney Mahar and I’ll be moderating today’s session compliments of U.S. Bank.
Before we get started, I’ll go over a few housekeeping items. All participants have been placed on listen only mode to prevent any background noise. Today’s webinar features PowerPoint and polls.
We will not host a live question and answer session today. Please book your appointment with a banker at usbank.com/book if you have additional questions following today’s presentation. Please share your feedback with us directly using the post-session survey.
This Webex conference will be recorded. If you object to this recording, you must disconnect from the conference line at this time. The recording will be posted to usbank.com/wellnesswebinars in the next week. I’ll turn on the recording now.
Now I’ll turn it over to today’s presenters. Take it away, Walt.
Thank you, Courtney. Good afternoon, everyone. My name is Walt Carey, Customer Goals Coach based here in Las Vegas, Nevada. I’ve been with the bank since October of 2019, and prior to joining the team I worked for a private firm here locally in the B2B space as a consultant and coach.
Proudly, I am also a 20-year active duty Air Force veteran. It’s my absolute pleasure to be with you today. And now I’d like to take the time to introduce and pass it over to my colleague and friend, Mark.
Thank you so much, Walt.
Hi, my name is Mark Salatino, and I’m a Deposit Product Manager at U.S. Bank. I live in Minneapolis, Minnesota, and our team is responsible for managing the customer experience with our consumer checking, savings, and CD products. And I’ll turn it over to Pat.
[INAUDIBLE] helping our early investors make sense of their money. I currently live in a suburb of cold and snowy Minneapolis, like Mark, here with my family, and I’m glad to be here today to discuss such an important topic.
OK, next up we have a poll to get things kicked off. So, on the right side of your screen, you’ll see some options. The question to kick us off here is which are you more interested in-- saving, investing, both, or I’m not sure. So, thanks in advance. If you could just go vote. While we’re tallying votes, I’ll turn it back over to Walt.
Thanks, Pat. You came here looking for an answer to this question, what’s the difference between saving and investing? And more specifically, which one is a better choice for you? We’ll answer the simple question first. What is the difference between the two?
Mark, we’ll start with you, my friend, my subject matter expert on savings.
Thanks. So, savings accounts are a great choice for keeping your money safe and secure. They’re insured by the FDIC, which means that even if your bank were to collapse, the federal government would ensure you got your money back up to $250,000.
Money that you have in savings tends to be more liquid, which is just a fancy way of saying it’s easy to access. And that’s why savings accounts are a great place to keep your emergency fund. So, for example, if your water heater breaks and you need to pay the plumber, it’s as simple as transferring some money from your savings account into your checking account using your mobile app, going online, or stopping by an ATM. And you’ll also earn some interest on the money that you keep in a savings account, too.
And now thinking about investments, while savings accounts can be low risk options, their interest rates are typically far lower than the returns you could see from investing. So when you have a bigger, longer term goal, like funding your retirement, which is a common one many of us have, or when you have additional funds that you want to grow, investing can be a way to realize a higher return over time.
So, to summarize, and we know everyone here on this call works very hard for your money, investments can make that same money work hard for you. And, Courtney, I’m seeing here it looks like you do have some poll results in. Courtney, are you available? Looks like we have some results. I’m just looking over here at the margin.
Yes. The poll results are in. But before we reveal the results, Mark and Pat, which topic do you think is going to win?
Well, it’s pretty clear that savings is going to win because, obviously, everybody came here to hear me talk about savings.
Of course, I’m going to be biased and say I think it’s investing.
I love it. As a goals coach, right, I’m going to pick in between. I’m going to be Switzerland here. I’m going to say both.
Look at that. The results are in and it looks like both. People want to know about both. Go figure.
Yeah. Exactly. So, let’s talk about savings. So, with savings you deposit your money into an account at a bank, and in exchange for providing those funds to the bank, the bank will in turn give you a percentage of those funds back as interest. So, it’s more secure than keeping your money in cash somewhere in your home, plus the bank actually pays you for keeping your money with them.
There are generally three different types of savings products. So, let me describe each one. The first is a savings account, which I referenced earlier. And this is a relatively simple product. You can open the account with a small amount of money, usually about $25, and over time you deposit money into the account when you have extra money to save, and then you withdraw money from the account when you need extra money to spend.
The next is a money market savings account. And the difference between a money market savings account and a regular savings account is just that a money market savings account usually pays you a higher interest rate, but in return the minimum balance requirements are often higher, usually at least $10,000. And if your balances fall below the minimum, the fees are sometimes higher, too. So, this product is ideal for someone who’s planning to save larger amounts of money, usually in the tens of thousands of dollars.
And then the third type of savings account is a certificate of deposit, often referred to as a CD. You’ll hear the term time deposit. With a CD, you agree to deposit a certain amount of money for a specified period of time, and you agree to keep it at the bank and not touch it for the entire time. So, for example, if you open up a 12-month CD today, you agree not to withdraw the money until 12 months from now. In return, the bank is usually willing to pay you a higher interest rate than what you’d receive on a savings or money market savings account since the bank knows with a high degree of certainty that the funds will be at the bank for 12 months.
So, keep in mind that if you need to access your funds early, there could be early withdrawal penalty fees that could reduce the earnings on the account. So, this product is ideal for someone who has funds that they know they won’t need to withdraw for a while. They value the certainty of the FDIC guarantee, but they want a higher interest rate than what they’d receive on a more liquid savings product.
Thanks, Mark. So, let’s talk about how does investing work. So personally, I started out my career as an advisor working with clients, many of them who were just getting started. And one thing I learned early on was how important it is to understand the basics. If you think of it, many of us are never taught any of this in school, and until we take the time to get our heads around really the fundamentals, it can be hard to feel confident in making any decisions about investing.
So how do you really make money when you’re investing? At the highest level, it means you have a small stake in the companies that you invest in. There are many different ways to invest in these companies. So, stocks you’ll hear about. You might also hear that referred to as equities. Think of these are really ownership shares in a company. And when a company appreciates in value, your share of the company is worth more as well.
So, a return can come in two ways, appreciation and dividend payments. Both are driven off the company’s earnings. You can invest in one specific company by purchasing one company stock, or you can buy a little bit of multiple companies through mutual funds or Exchange Traded Funds. And you might hear that referred to as ETFs.
Now it is possible to lose money when investing, important to note that, including your principal investment. Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. But I’ll talk about ways to manage those risks later on. Before that, I’d like to go back to Walt, who can help us understand where to get started.
Thanks, Pat. All right, so now that we know the answer to the first big question, what’s the difference between the two, let’s tackle the next one. How do you save and invest for your goals? Today we’re going to take you through a six-step process to putting your money to work towards achieving your goals. We know it’s not easy. So, I’ll share some psychology tips along the way for sure.
When I work with coaching clients, we go through an activity called goals discovery, where you start by asking what you want from your life. These aren’t just financial goals, but also include goals like building your career, perhaps pursuing a passion, things of that nature. We typically spend an hour exploring and answering three questions.
The first question is centric to the why. When you connect your goals to a purpose, you put that purpose into words. You make that goal more powerful. Building that emotional connection will help you stay focused on the goal itself. And if you have trouble answering that why aspect that I mentioned earlier, that’s worth exploring in itself. Are you doing something because it matters to you, or because it’s an expectation from somebody near and dear to your heart?
The second question is when. We use a digital tool to create that timeline of your life and your vision. A few things become apparent when you lay it out like this. You’re always going to be working towards multiple goals. Some, of course, are short term and some are long term. Some goals are foundational to others when you think about it, too.
If you want to start a business, for example, you want to get a deeper understanding of your budget and pay off debts so that you can get financing for your business when you’re ready to begin. This might bring you back to your why that I talked about earlier. If your goal of paying off debt wasn’t very inspiring in itself, maybe it will feel more meaningful to you when you envision yourself the day of your ribbon cutting ceremony as a business owner.
The third and last question is how much will this goal cost. Not every goal has that financial component, as I mentioned earlier, but many of them do. If you’re saving for a house, your biggest expense up front is going to be that down payment, followed by other purchases you’ll need to make in the short term, or invest in-- perhaps moving costs, furniture, or that first big trip that you plan to the home improvement store.
Overall, it can seem overwhelming, yet very empowering when you see your goals alongside each other. Your life might not directly reflect that timeline that you see that you create with your coach, but you definitely can change it.
And Walt, if I can just jump in, I personally believe it’s so important to know your goals and why they matter to you. We’ve seen even people with the best financial habits often haven’t put enough thought into the why behind their goals and made that emotional connection that Walt talked about. And this is really important because we know that life can and will throw curveballs. It doesn’t always go as planned. So, when you’re emotionally committed, it can be sometimes that difference to helping you maintain the right habits to overcome any setbacks that you face.
So, I’m probably not the first person to tell you that it’s important to have a budget. And when you have a good handle on your cash flow and your expenses, you know how much you can afford to save, and you can look thoughtfully at places you might be able to save a little more and work toward those goals that Walt got you all excited just now.
When I work with clients, I definitely start with what I call low-hanging fruit and I take that approach. What are your expenses that can be eliminated to help you build a strong foundation early on without causing you a lot of stress when you think about it? When you print out your budget, as Mark shared, look at the black and white. You might see some things you’re spending money on that are not especially meaningful. We’ve all been there. Maybe you have some subscription that you hardly use or bills that you can definitely negotiate.
As a matter of fact, I have a client in Cincinnati, who I’m currently working with, and we took the same tactile approach to better lay the groundwork in establishing a sound and structured savings process, which organically, as you can imagine, led to some huge behavioral shifts between her and her spouse that are empowering them both in achieving their financially related goals. That is definitely a big one for many people. If you can chip away at the debt and reduce those payments, that frees up additional money you can put towards your goals.
We could spend a whole webinar talking about budgeting. And you know what? In fact, we did, just last month. You can find the recording of our webinar, it was called “5 tips for mindful spending,” on usbank.com/wellnesswebinars, along with some handy tools and resources.
As I highlighted regarding my Cincinnati client, sticking to a budget and setting aside money for your goals means making some changes, particularly for them in their spending behavior. That is not just a math problem, but definitely an emotional one as well. Your beliefs, attitudes, and behaviors are shaped by a combination of factors. Psychologists use the term nature and nurture to describe this complex equation, if you will.
I’ll start with the nature, your genes. The genes themselves influence the hormones in your brain. When you spend money on something you want, your brain releases dopamine-- we’ve all been there-- which is the same happy hormone that you get when you’re falling in love. No wonder so many people enjoy the retail therapy aspect and cheer themselves up.
There’s also an opposite reaction in which we feel distressed by an experience of losing money. Everybody makes them natural [INAUDIBLE]. If you’re experiencing a high level of distress at the idea of perhaps losing money, then you might want to find an easier way to save.
While there isn’t one specific saving gene from that standpoint, there seems to be genetic compound, or a genetic component, I should say. But that’s not the whole story. Your environment, like I mentioned earlier, what scientists sometimes call the nature component, plays a big role. Your upbringing, your family values, your own experience play a huge role in how you feel about money.
There are social and cultural factors that can influence your beliefs and behaviors around money as well. One example, again, just to use my Cincinnati client, who I love to death, they never really put much thought into a savings plan in general because they both significantly were cash flow heavy and positive. But as the relationship and coaching transpired and unfolded and developed, we realized between the three of us that this definitely was important.
So, it’s time [INAUDIBLE] which of these sounds more like you-- a saver, or a spender, or somewhere in between? I’ll talk about myself for a second. I’m generally more of a saver than a spender. That probably is really shocking coming from the savings guy here. However, my wife is the opposite of me. She’s more of a spender than a saver.
And so, this is probably a good time to mention that there is no right answer here. Anyone can be successful with personal financial management, regardless of whether you tend to be an extreme saver, an extreme spender, or really anywhere in between. The reason is that there are times when savings is more appropriate and times when spending is more appropriate. And if you live with someone who is the opposite of you, like I do, then that can actually be helpful in finding the right balance.
Yeah, Mark, and I’ll say my life’s really been a journey from spender to saver, and I think a lot of us go through that. I think back to when I took out my very first credit card in order to get a free Minnesota Timberwolves T-shirt. And I also remember the first bill, which was not small. And so, you learn early on, and sometimes through mistakes, about how important it is to pay yourself first. And so, I’ve really tried to become a saver. But again, there’s no right or wrong here. That’s been my journey.
For me personally, guys, I’m in between for sure. Finding that harmony between the two approaches has been fun in my journey personally.
That’s great. Thanks, Walt and Mark. The poll results are in and it looks like we have a lot of people who agree with Walt and they are in between.
If you’re inclined to be a spender, honestly, don’t despair. Here are some tips to help your brain build better savings habits, if you will. Friction is a scientific term for a small amount of effort that makes you more or less likely to do something. You can reduce friction by making it easier to save, and you can remove those shop-- or excuse me, you can add friction by slowing down your spending. One way to add friction is to remove those shopping apps and saved credit cards that you have on your phone, which we all do.
Accountability is another useful technique. When you’re feeling highly motivated, like right now, you can schedule your future self for activities, like meeting with a goals coach or a financial advisor. Once that meeting is on the calendar, you have another person involved. You’re more likely to follow through.
You can also join enlist an accountability partner. I’ve done in the past where I’ve brought on a friend or a family member who helped keep me honest or keep you honest as you work towards your goals.
It’s also important to stay emotionally connected, as I talked about early on, to the goals that you have identified. If you’re saving for a new home because you want your kid to grow up there, keep a photo of your kid in your wallet, but put it in front of that credit card. And if your goal feels so big that you can’t quite imagine getting there, break it into smaller chunks, milestones. When you hit one of those milestones, celebrate. The feeling of accomplishment will keep you motivated as you move forward toward your goals.
Mark, what are some of your favorite saving habits?
Well, my best advice is to make it easy to put money into longer-term savings and more difficult to get it out of longer-term savings. So, most banks, including U.S. Bank, have automated features available, mobile app to make it easy and frictionless to move money from your checking account to your savings account. The feedback I hear from many people is that once they automate transfers from their checking account into their savings account, over time they don’t even realize it’s happening, and they don’t notice any real difference in the amount available [INAUDIBLE]. And when you’re saving that consistently, even if it’s a small dollar amount, over time your savings can really add up.
Now on the other hand, when you have money already in longer-term savings, you want to add friction to make it harder to get at. So, you stay disciplined in achieving your longer-term financial goals. A great way to introduce this type of friction is to increase the amount you contribute to any tax deferred retirement plans you have, such as a 401(k), for example. This will help limit how much money is available for spending while also potentially reducing your taxable income.
If it turns out you need more money in your budget, then you can decrease this contribution if you need to. But since there will be at least a few steps you’ll need to take in order to do that, you’ll slow yourself down, so you’ll have time to reflect on whether or not it’s the best decision.
Thanks, Mark. So, let’s take a look at investing for things like retirement. So, if we think back here, we have our goals in mind, our budgets buttoned up, we are starting to develop some good savings habits, and now we can think about start investing for our long-term goals. And for most people, it’s retirement that’s one that’s commonly on their mind. So, let’s use that as an example.
Let’s say you have 20 years until retirement, and you choose to save strictly into a savings account. Now let’s assume an average rate of half a percent. With an initial contribution of $5,000, you’d end up with just around $5,500.
Now let’s look if you chose to invest that money. So, if you earn an average of 8%, your 5% would get around $23,000 in 20 years. So, it would grow to that $23,000 mark. If you wait another 10 years, you would have more than double that. So, this is all without putting any extra money into the account, just allowing it to sit and grow.
And of course, this assumes 8%. Historically, the markets have been positive, but can fluctuate. So again, just take note of that for this example, but it does help illustrate it. And I’ll end by saying Albert Einstein I think said it best, “Compound interest is the eighth wonder of the world.” And I think this example highlights it.
So, with that in mind, let’s go a little deeper on the next slide here. One question I often get is, when is a good time to start investing? So, let’s focus on the concept of time.
The short answer is that it’s generally better to start early so that you can get the benefit of time. And if you think of it, time itself is one of the most important tools you have when it comes to investing.
So, looking at the hypothetical example here assuming a 7% annual return, at the age 25 if you started investing $200 a month, by the time you were 65 you’d have around $530,975. Now compare that to if you waited until you were 35, so 10 years later. You would have $246,281.
So, you can see the 10-year head start results in the early saver generating more than twice as much in savings by age 65. So, this shows the power of time and starting as soon as possible.
The last thing I would give you on this if you’re just really trying to understand the concept is staying invested once you’re invested. So, one pitfall we see is that people will try to time the market, meaning they’ll try to buy or sell based on short-term market fluctuations. I’ll tell you, this strategy rarely works and can result in significant stress, going back to that psychological component Walt mentioned, and it can decrease your likelihood of achieving your goals. So again, start, but also stay invested is key.
And with that, I’ll move on to the next slide here. So last thing, let’s talk about tips for getting started. The simplest thing I’d call out is that many of you on the call have retirement plans offered through work. And it is important to save into those plans. That can be a great step one.
It’s a great way to also get a benefit from your employer. Often, employers will include an employer match. And if your employer does, I would encourage you to contribute enough money to capture that full match. So, for example, if your employer offers a 5% match, I’d recommend contributing at least 5% into your retirement account.
Now another great option is to consider an IRA, which stands for Individual Retirement Account. And depending upon your income level, this may be a great option to help you contribute towards retirement.
And beyond retirement savings options, you can consider investing towards your kid’s education via a 529 plan. You can also leverage a health savings account to invest your money to cover your future health care expenses. Although important to note U.S. Bancorp does not offer HSAs, still something to keep in mind as an option.
And we may have skipped a slide there. So, backing up, Walt, let’s talk about this concept of what if you aren’t investing for retirement.
I reflect on it and I’m thinking of myself as you were talking, Pat, like where were you at 20 years ago? You know? But in all honesty, those that are listening, if you haven’t started saving for retirement, don’t despair. We aren’t here to make you regret your choices, but to help you make the right choices to move you forward.
So, let’s talk about savings again. Savings is a great choice for your short and medium term goals because it’s secure, it’s liquid-- again, meaning it’s easy to add to it and withdraw from it – it won’t lose value, and you’re going to earn a little bit of interest. Earlier I talked about the differences between the three common types of savings products. Depending on the amount of money you need and when you need it, you do have a few really great options.
So, let’s start with the savings account. It’s a great product to use for that emergency fund, for example, because the balance requirements are often very low. So, you can move money in and out frequently without having to worry about dipping below the minimum balance. And it’s a great product to pair with a checking account so you can move money easily between the two accounts, depending on your needs.
Moving on to money market savings, like I said before, the minimum balance is usually around $10,000. So, you use this account for larger amounts of money that you’re saving for something significant, such as a vacation.
And because we’re talking about investing as well here, a money market savings account can be a great product to pair with an investment account. Often we’ll see that when customers cash out of investment funds, but they’re not sure what fund they want to move it to or maybe they want to stay out of the markets for a while, they’ll put the money that they made from selling their investment into a money market savings account until they figure out what they’re going to do with it longer term. This way they can still earn some interest on the money, but it’s liquid, so it can be moved very easily.
And then going on to CDs, even though you can’t touch the money you put into a CD until it matures, the good news is that there’s a wide variety of CD maturity, from as little as one month to as much as seven years or sometimes even longer than that, and everything in between. So, if you have money right now that you’re planning to save and you’re very sure that you won’t need to access it for a certain amount of time, then a CD may be the right fit for you. And then the interest rate you get paid for a CD is going to be relatively good, especially in the longer terms like 12 months and beyond. So, for example, if you’re saving up for a wedding, which you know is about a year away, you can earn some meaningful interest by putting your money into a CD.
Mark, as you were talking it dawned on me, one of the most foundational goals that I guess everyone should look into is saving for that rainy day. I saw you called it an emergency fund.
Yeah. That’s right. A lot of people call it an emergency fund.
That’s true, but would you agree there’s a lot of baggage that comes with that word emergency? And you’re not just saving for a disaster or an emergency per se. Life is expensive and unexpected expenses come in all shapes and sizes, as we know, in car repairs, doctor bills, broken appliances.
Sometimes it’s the good stuff. Maybe your kid makes that basketball team and you need $100 to pay for uniforms or registration fees. Or maybe you just got invited to your friend’s wedding-- on Zoom, of course, because of COVID-- and you want to send a nice gift over to her. You may not know exactly what you’re going to need it for, but you definitely want that money to be there when you do need it.
Walt, it was definitely a rainy day when my water heater broke.
Oh boy, the dreaded water heater. That’s exactly the kind of thing we’re saving for.
Right. So, a regular savings account, like I said before, it’s a great choice for this kind of goal because it’s so flexible and it’s easy to access your money when you need it. How much to keep in that savings account though, that will depend on your financial situation. A common rule of thumb you may have heard before is three to six months of expenses, but even $1,000 can make a meaningful difference in your ability to weather the unexpected without going into debt.
So as Walt was saying, many people feel guilty about using the money in their rainy day fund. They think it should only be used for serious emergencies or very rare once-in-a-decade type of events. But that’s not the case. If you don’t have enough money in your checking account to cover a payment, the rainy day fund should be used as a first resort, not a last resort.
Also, too, some people work jobs where they get paid only once a month or sometimes even less frequently than that, but even though that’s the case, most of their bills tend to be due monthly. So, people in that situation can use that rainy day fund to help smooth out their cash flows. In other words, save more during times when you have more cash inflows than outflows, but then dip into your rainy day savings fund during the times when you have more cash outflows than inflows.
As a general rule, as long as you’re being thoughtful and intentional about how you’re using your rainy day fund and staying disciplined about adding to the fund frequently, you can use the funds confidently without feeling guilty or ashamed. U.S. Bank has two different savings tools that can help automate your savings so you can establish these good saving habits without even thinking about it. The first is automatic transfers. You can send an automatic or a recurring transfer to move money from your checking account to your savings account on a regular basis.
One good way to use it is to set an amount to be transferred on payday. So, for example, if you get paid every other Friday and consistently save let’s say $50 of your paycheck, you can use the automatic transfer feature in either usbank.com or on our mobile app to set up that recurring transfer. This is a great way to save larger chunks of money. And if for some reason you don’t have enough money in your checking account to make the transfer, then it won’t happen. So, you never have to worry about an automatic transfer taking your balance negative.
The other tool that we offer is purchase transfers. And this is a really useful feature that lets you save money every time you use your debit card or credit card. You just log into your account at usbank.com and set any amount between $0.25 and $5, and every time you make a debit card or credit card transaction, that amount you set will get transferred from your checking account to your savings account.
It’s a great way to stay disciplined about savings because every time you spend, you save. So, purchase transfers are going to help you save smaller amounts, but more frequently, while the automatic transfers will help you save larger amounts, but less frequently. But when you use those two features together, your savings can start adding up very quickly.
Mark, I was definitely smiling when you brought up the automation feature in itself. For someone like me, that automated approach has truly been successful. I leverage it to not only set up allocations for savings, but also to pay my bills. I can trust it, and I definitely verify that using that tool on a monthly basis.
All right, well thanks, Mark and Walt. I think you’ve definitely shared some great tips for saving. And so, when we think about investments in this whole equation, we talk about investing for retirement, but investing may also be a good option to reach other long-term goals. So again, your reason to invest is really important because it helps dictate key criteria, like your time horizon and the amount of risk that you’re willing to take.
So going further into that, if you’re thinking of buying a home, for instance in five years, and you want to save for a down payment, investing that money could help you earn higher returns and reach that goal sooner. The S&P historically averages around 8% return each year, but that is just an average. And like I mentioned earlier, there are some down years.
So, here’s where risk comes into play, because if the market happens to be down when you’re ready to buy your home, are you comfortable taking a loss or waiting a little longer for it to bounce back? So, this brings up a key point when thinking about risk. And I really want to call this out because risk can be kind of ambiguous when you think about investments. It’s really all in personal tolerance for loss. So, this concept’s all about how you react when your money goes down.
So, think back. We’ll do a recent one. If you think back to March this year when the markets took a downturn, for those of you that were invested in the markets, how did you feel in that moment? Were you comfortable with the ups and downs in the market knowing that it will recover eventually? Or were you full of stress and panicking? Right?
This is an important topic and isn’t always an easy one to know where to land. So please know that as you’re thinking about this, we have both online tools as well as licensed advisors that can help you if you need more support to understand what’s best for you.
So now let’s get into some of the jargon around investments, which I think can be overwhelming. So, I’ll do my best to keep it simple. Portfolio, let’s start there. Portfolio is a term that describes your personal mix of investments. So, your goal, your time horizon, your risk tolerance determines how your investment portfolio is built. And this is referred to as your asset allocation, another key term.
So, your asset-- think of it as the money you have to invest-- allocation is how much to put into different investment options. So, going a little deeper here, different investment types respond to ups and downs of the market differently. So, for example, a more conservative portfolio might have more money allocated towards a collection of bonds.
And this is really because bonds at the highest level, when the market moves up and down, bonds typically stay pretty level. Not always, but generally as a rule of thumb. And this is also less risk overall with bonds. And on the other side, because of that, there’s generally less return.
Now if you have a more aggressive risk tolerance and a longer time horizon, you might have more money allocated towards stocks or real estate investments. And these can have larger swings in either direction, but they also have potential for higher returns. And that’s really that balance.
And so, once your portfolio is set up, it’s also not likely to stay the same. It can move. So, the percentages can change, and you’ll see that on the screen here. And so that’s where we talk about rebalancing, which is really the act of taking your initial targeted allocation and adjusting it as the market adjusts the balances within your accounts. And really the whole goal is to keep you on track for your goals.
So last but not least here we’ll talk about the options available to you. And again, we have resources after the call we’ll talk about to help if this gets overwhelming. There’re a few notes on here that I think are important.
So, there’s really three ways to invest. You can choose your own investments. You can do that with a self-directed brokerage account, you could invest through and with the support of a financial advisor, and you could also use our robo-advisor. So as the name implies, let’s get into self-directed here.
Self-directed investing places the greatest amount of work on you. So, you’ll do everything yourself. Think of this as the DIY approach to investing. You choose the exact funds to build your portfolio, you make all the selections yourself, and it’s truly a self-directed account.
So, the upside is you have control. The downside is that it takes a lot of time and attention and it takes a lot of energy to really research, understanding the tax benefits, understanding all of the different financial implications that come with making your own selections. So, if you’re comfortable with that, you can open a self-directed account.
There’s no minimum. It could be an easy way to get started. But it really just depends on the type of investments that you want to purchase, that’ll determine the minimums, and it’ll also depend on the amount of time and energy you want to commit to this.
So, because of that do it yourself approach being sometimes overwhelming, often we find people leveraging a financial advisor. And now an advisor is really a trusted professional who helps you first determine and prioritize your goals, then they’ll help work to understand your unique needs and partner with you to develop a plan to help you make progress towards those goals that we’ve been talking so much about. Now an advisor can work with you in person, or in our team’s case we have advisors over the phone that work nationally, whether that’s through a shared screen, a phone call, or even video conference. And so, this can be a great option if you simply value with help from a live person, or if you have multiple goals that you’re trying to achieve.
Last but not least, the third option is one of the more popular emerging options we’ve seen happen. It’s called a robo-advisor, which we touched on briefly earlier. So, a robo-advisor lets you guide how you want your investments to be set up and it manages them for you. So once your portfolio is created, it is adjusted, or what we call rebalanced, going back to the key terms.
So, I’ll give an example of how this works. Let’s say for your portfolio, it’s determined that you should have 70% of your money invested in a more aggressive bucket and 30% in conservative funds. As the market moves over time you could end up with, let’s say, an 80-20 ratio. So, this might mean that you have too much money in the aggressive bucket, meaning you’re taking on too much risk.
So, when this happens, the robo-advisor will buy and sell appropriately to really rebalance you back to that 70-30 mix. And the robo-advisor monitors your account regularly, keeps an eye on the performance, and it’s all done automatically.
So, it also allows you to have multiple types of goals you’re investing into. So, for instance, you could be investing toward retirement, major purchase, or even just a general investing account.
So, with that, I’ll turn it over to Walt.
Thanks, Pat. The collaborative approach that I’m finding that’s drawing the most success, if you will-- and again, not to sound prescriptive in nature, it’s first starting with that timeline I talked about earlier. Whether you’re a seasoned business owner or a young millennial in college, your time is your most precious commodity when you think about it. That said, identifying a timetable and being spot on with the completion date is not as valuable as identifying, and most importantly, envisioning yourself achieving said goal. The timeline itself fuels the empowerment that we all three talked about earlier in achieving the goal and supports one’s accountability along the way when you think about it.
Next, we look at all the moving parts of your finances together, along with some of my amazing colleagues and subject matter experts, to guide you in the best tactile approach to paying down your debt while staying aligned with a living, breathing document in the budget. As I mentioned, holistically alongside you, with the help of some awesome partners that I have that are led by Pat, you will get a true understanding of your comfort with risk. A given, as I would argue perhaps this would be the foundation, is the strong, clear lines of communication you and your partner will have to have, not only on the onset of the goal discovery process together, but throughout every step of the journey.
As goals coaches, we’re here to bridge that gap and connect the human component to the tactile measurables that are uncovered by the financial experts Pat highlighted. Lastly, after a deep dive readiness report is established, my team and I will ensure you are aware of the personalized resources that are available to not only, again, fuel your journey, but also support achievement of your goals centric to your why.
The great thing about it all is U.S. Bank offers that one-to-one coaching at no cost. A goals coach will help you explore your goals, prioritize them on a digital timeline that I mentioned earlier, and help you create an action plan to achieve those goals you mention. We’re not able to give you financial advice and recommend any products or services, but we can connect you with the experts like Pat and Mark at U.S. Bank who can address your financial needs in that regard. To book an appointment with me or one of the other goals coaches, you can scan the QR code that you see right there on your screen, or simply go to usbank.com/exploremygoals.
Yeah, I think that’s such a great option just to get your bearings around your financial situation, Walt. I have so much respect for what your team does.
In terms of investing resources, we’ve covered a lot today. And although you may have taken some good notes, the reality is it can be overwhelming to make sense of all your options. So, we do have many resources to support you. So, you can access our website if you’re someone who values educational content. We also have a great investment options tool that’s an interactive way online to assess what option is best for you. And you can also request an appointment easily online to meet with one of our virtual advisor team members.
That’s great, Pat. And we also have some helpful resources around saving and investing at usbank.com/financialiq. One of the resources there for students is the chance to win up to $20,000 with the U.S. Bank Student Scholarship. By completing online financial education lessons powered by EVERFI, students are eligible to win either $5,000 or $20,000 in scholarships. The more you learn, the more you could win.
Students can also scan the QR code with your phone’s camera from the slide or visit usbank.com/scholarship to get started.
That’s great, Courtney. Wow, where was that offer when I was in school? As Courtney mentioned earlier, today’s presentation is compliments of U.S. Bank. You have an opportunity to enter to win a $1,000 cash prize at complimentsofusbank.com. It’s as easy as entering your name, email address, in the event code INVEST. That’s I-N-V-E-S-T.
And while you’re there, send an e-compliment card to your family and friends so they have a chance to win the cash prize, too. And you can also share it on social media using the hashtag #ComplimentsofUSBank.
One thing I definitely want to echo to everybody today is saving and investing should be fun and exciting. Just as important as the tactile approach that I talked about earlier, both saving and investing, being aware of the human component or your why as [INAUDIBLE] would highlight is an intricate part in that harmony and synergy one finds.
So, what I want to leave you with is that saving and investing both play an important role in managing your financial life. And if you haven’t done much of either yet, that’s OK. Don’t worry. It’s never too late to start saving or investing and take control of your finances.
And I would just say I think we’re in the day and age where a lot of people value doing things themselves. And so, we can accommodate that. We have tools to do that. But just know you do not have to do it on your own. That’s what our company is about. We’re here to help you. Between U.S. Bancorp Investments and U.S. Bank, we have options that are both human centric, digital, and they’re all around meeting you where you’re at and helping you just gain that sense of confidence so that you can make more progress. So, with that, I’ll turn it to Courtney, and really appreciate everybody taking the time today.
Well, thank you to all of our panelists today. We did receive some fantastic questions during the registration process that we’ll also address. If you still have questions following today’s session, please book your appointment with a banker at usbank.com/book.
Our first question comes from Yenny. How much should I start with for investing? Pat, can you please help us answer this question?
Yeah, I’ll do my best. I think, so going back to the foundation, I think it’s important that you have first off a saving and investing mindset, which means you’re actually thinking about your money on a regular basis and trying to make better choices. And I can tell, Yenny, that’s on your mind by nature of the question. So, I think it’s a great one.
I think investing is one of the best ways to grow your money over time, but a common belief that prevents people from getting started is this whole idea that you need a large amount of money to get into the game, so to speak. Truth is the actual amount you need might be much less than you think. So, it’s a good idea to first off manage your debt, make sure you’re building that savings, and then whatever’s left over you can really start putting to work. So, investing really depends on the product you’re in in terms of minimums.
So, I’ll give you a few examples, but just know if you want to get started, there’s probably a way to do it. So, for example, you can begin investing for the price of a latte thanks to apps these days, right, which will allow you to start with as little as $5. These apps provide convenience, but not a lot of handholding if you’re new to investing.
You can also choose a robo-advisor that uses more complex algorithms with a little human assistance to help build a portfolio for you. So, these typically have minimum deposit ranges anywhere between $500 and $5,000.
Another option is working with a financial professional to create your portfolio in this case, the minimum deposit will vary depending upon the institution you work with. I can tell you our team that supports clients nationally in a remote setting are financial advisors who work with clients as low as $5,000 that are starting to get moving. But even clients earlier than that, if it’s on your mind, we have teams that are able to help you navigate the best starting point. So, you can do the self-directed route as well. I should note that. That’s an option that doesn’t have minimums.
And in all these instances, the key is cost as well. Make sure you consider costs like management fees, sales commission fees, and other costs associated with whoever you’re working with. And so, doing your research is important when you’re considering when to get started and how much to get started with. So great question.
Thanks, Pat. That’s really great advice and helpful for those of us looking to get started. Our next question comes from Kim and she asked, “How do you get your significant other on board with better spending?” Walt, I think you have some great advice for Kim.
That’s a great question, Kim. I of course, I’m biased. But it starts with beginning with what I mentioned earlier in discussion where you and your significant other are aligned and perhaps don’t see eye to eye as it relates to the view on your finances and how money can fuel and complement the life you envision together. Meeting with myself or one of my colleagues is a great place to start as far as having those open discussions with a goals coach, not only in having a sounding board as you can imagine within a safe environment-- and a safe and confidential environment I should add-- but also perspective and insight from an unvested party can truly add value and perhaps seeing the forest through the trees at times.
Great recommendation. Thank you, Walt. And thank you to all of you for joining today’s presentation. Please use your phone’s camera to register for our next webinar, “Overlooked essentials for credit wellness,” on March 25 at 1 p.m. Central. Remember to provide us with your feedback in the post-event survey following today’s session. This concludes our webinar. Thank you, and have a wonderful afternoon, everyone.
A goals coach will help you explore your goals, prioritize them on a digital timeline, and help you create an action plan to achieve those goals. Coaches are not able to give you financial advice or recommend products, but they can connect you with experts at U.S. Bank who can address your financial needs. Schedule time with a coach to get started.
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