How Living with Your Parents Makes You Rich

Live With Your Parents, Buy A House By Movoto

How much do you know about finance?

Each time financial surveys are published, I astonished at the results. These surveys are not new but, reading some books on economic history, they have left me amazed:

According to a 2007 survey in the United States:

• Almost a third (29%) of respondents said they had no idea what the interest rate on your card was.

• Another 30% said it was less than 10%, when in fact the vast majority of cards have interest rates well above 10 percent.

• The 50% of respondents said that they had learn nothing or not too much about finance at university

A 2008 survey revealed that:

• Two-thirds of Americans ( 66.6% ) do not understand how compound interest works

In a survey conducted by a group of graduate students from School of Business at the University of Buffalo:

• Only 14% understood that equities would outperform bonds in  more than 18 years.
• The 59%t did not know the difference between a private retirement plan, the Social Security pension and a pension plan.

But it does not only happen in the U.S., in 2006, the British Financial Services Authority conducted a survey which revealed that:

• One out of five respondents had no idea what would be the effect on the purchasing power of their savings if inflation rate were 5% and an interest rate were 3%.
• One out of ten did not know which was the best discount for a TV which cost £ 250: if £30 or 10%.

And you, how much do you know about finance?

Who wants to be a millionaire?

Normally, we associate to become a millionaire through the lottery. Few gambling games make you millionaire overnight and the odds  are very small.
 

However, the possibility of reaching one million dollars ( $ 1,000,000) through our savings is not as unattainable as we think. A regular savings can become millionaires someday. Of course, depends on three things:

• The age at which we start to save
• The amount we save periodically
• The return we get

This graph shows the monthly effort we should do if we are to $ 1,000,000 at age 65 depending on how we start to save:

* Average return on equity expected 7%

* Average return on deposits expected 3%

* The calculations do not take into account the inflation effect

Monthly savings needed to get 1 million dollars to 65 years depending on the age at which we start saving :

Get 1 million dollars is possible but involves a considerable effort, especially when we start to save.

If you are 25 years old , $ 381 monthly savings can be almost impossible, but think that if you started to work, you probably have few expenses. As time passes, the effort is reduced: 

• At 35 the same amount is equivalent to $ 268 / month from now, 
• At 45 amount to $ 189 / month from now
• At 55 amount to $ 133  / month from now

 * Estimated inflation of 3.5%

Another way to reduce the effort is whether we have saved a certain amount . For someone who had already saved $ 20,000. Savings per month that is needed to get 1 million euros would be:

 

Who Wants To Be A Millionaire?