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?(At Home) My Future Life Project Chapter 5 – Investments & Retirement Background: You know what one of the coolest things about being an adult is? Financial independence. You know what one of the most stressful things about being an adult is? Financial independence. In this project you will map out your future life and the financial responsibilities that will come with it.Chapter 5 – Investments & RetirementHow are you going to pay for your child’s college tuition? How are you going to retire comfortably if the average Canadian needs anywhere between $300,000 to $1,200,000 to do so comfortably?After paying your monthly expenses you should have a little dough left over. What should you do with it? Ideally you should have at least 3-6 months' salary sitting in your bank account in case of emergencies, for things like:Medical emergenciesFixing your houseYou lose your job and need to keep paying bills But beyond that little emergency fund, putting all your money in a bank account and just letting it sit there isn’t the smartest investment. Money in a bank account is not really gaining any value, $3,000 in a bank account after a year will still be $3,000. Meanwhile the cost of living goes up: bread, milk, gas, homes all increase in price. So, in a way, your money in a bank account is losing value, or purchasing power. So what should you do instead?There are a few smart investments you can make:Real Estate - Buying houses or land and either doing improvements and selling them for more money or renting them out for additional income.Mutual Funds - A way to invest in the entire stock market, avoiding the risk that comes with investing in just one company. This is the most recommended form of investment, best balance of risk/modities - A way to invest in a good like corn or oil. You can hit it big if the price of the good goes up but it is very risky and many people have gambled their savings away trying. Government Bonds - Investing your money in the government who promise to repay you with significant interest later. Very low risk because governments never go out of business, but the rate of return is lower than others.Pay off debt – Why not use your extra funds to pay off your student loans, car loan or home mortgage faster? Not always the best way to maximize your money but it’s never a bad idea to pay off debt.In your final project presentation (which we will talk about below) you will have to answer the following questions on each investment type:Real EstateInvesting in your own home - What aspects of a home should you invest in that would add the most value to your home?Investing in your own home - What aspects of a home should you NOT invest in, that would add little or even decrease the value of your home?Investing in other rental properties – Your mortgage for a rental property is $800/month but you are renting it out for $1200 a month. A) How much extra monthly income will this rental give you? B) Aside from supplemental income, why else is this a good investment?Investment CalculatorHow many total years will you be working? Think about when you will start working and when you might stop. The average Canadian works for 30-35 years. Use the investment calculator to calculate the rate of return for each investment type and how much each type could potentially yield for your retirement. Then complete the investment gambling game to determine how the level of risk of each investment type will affect your retirement savings.Note: Your starting amount is $0. Monthly contribution is amount leftover from monthly budget. InvestmentRate of ReturnRisk of Losing MoneyNumber of working yearsMonthly contributionEnd Balance ($ for retirement) Mutual Fund10%MediumCommodities15%HighGovernment Bond3%Very LowInvestment Gambling GameBackground: Nothing in life is a guarantee, and investing your money is the same. The value of stocks and goods can go up or down, so it’s important you balance reward (how much money the investment can make you) with risk (the potential to lose money from an investment). Instructions: Choose an investment type to invest in. Be careful to read the potential effects of each carefully before choosing. Then roll a dice 5 times, each time determining if any money of your investment is lost. Mutual Fund: Medium risk of losing your money. The stock market can go up and down but usually always heads in the right direction over a long enough period. Any time you roll a 2 or 4 subtract $5,000 from the end balance you calculated modities: High risk of losing money. Thinking the price of sugar will increase over time is no sure bet. This is pure gambling. Any time you roll a 2, 4 or 6, HALF the end balance you calculated above. Government Bond: Very low risk of losing money. The Canadian government can’t really ‘go out of business’ but I guess anything is possible. If you roll a 3 for each of the five rolls you lose everything. Otherwise you keep it all. Investment I chose:Total money for retirement left after rolling for risk: ................
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