personal-finance-improvement

Compound Interests Can Improve Your Personal Finances

personal-finance-improvement

Some of the most effective ways to improve personal finances of managing money include: understanding basic financial concepts such as savings, investing, and compound interests; manage personal spending; know your net worth; and review your investment portfolio regularly once a year, said Kimberly Palmer of U.S. News Money.

To begin with, before ancient Romans were using coins as money the first bank accounts had already existed, NerdWallet said. Even before 352 B.C., the Romans were inventing checks. As a result, the first check was actually written in the eleventh century by a Persian traveler. Centuries later, during the Civil War (18th century), demand deposits accounts were brought into America by the British, as stated by NerdWallet. Today, demand deposit is known as savings, checking and money market (MMA) accounts.

Still, you can improve your personal finances by setting goals. First, be sure that you have money saved away for emergencies. This will protect you from overdue bills should an emergency arise. Know your net worth, and record your spending. This will help you acknowledge where you can cut back on spending.

In fact, savings, checking and certificate of deposit (CD) accounts were secured by the Federal Deposit Insurance Corporation (FDIC) four years after the Great Depression in 1933, says NerdWallet. Today, having a savings account is effective because you are insured for any losses by the FDIC, the same way savings accounts in Credit unions are insured by the National Credit Union Share Insurance Fund.

In history, the Securities Act of 1933, a federal legislation, was enacted to enforce laws against fraudulent investment activities in securities. Fox Business stated that in 1934 this act passed again, but to regulate secondary trading of stocks, bonds, and corporate securities (i.e., convertible or nonconvertible debentures), and to enforce laws. The Securities Act of 1934 became a law to protect people investing, Fox Business says. The Securities and Exchange Commission (SEC) is a federal agency that was established in the United States to protect investors of worthless trading.

On Feb. 1, 2016, the United States House of Representatives passed three bills to change federal securities laws, Securities Act of 1933, and Securities Exchange of 1934, says Andrew Kuettel.

To improve personal finances in the future, make savings a habit and be effective at it! No not matter how much money you save or invest in, whether you invest in life insurance, retirement savings plans or invest in the stock market, making savings a habit will protect you and family in the future from financial burden.

It is important to remember that when improving personal finances and habits of managing money with savings and/or investing, you should consider risks and time when considering return on investment (ROI), as stated on FINRA website. That is why it is wise to know your net worth and review your investment portfolio regularly, at least once a year, if you want to improve your personal finances.

Overall, understanding what risks are involved in such investments as CDs and stocks overtime will effectively improve your financial investments, therefore, know what investments accrue compound interest.

Compound interest earns interest builds wealth, says Deborah O’Malley and Melvin Pasternak. Therefore, you can change personal finances overtime by understanding compound interests.

 

Resources

 

  1. Kimberly Palmer, 25 Ways to Improve Your Finances in 2016, U.S. News Money, 2015

 

  1. NerdWallet, The History of Bank Accounts, 2014

 

  1. Fox Business, A Brief History of the Securities and Exchange Commission, Fox News Network, LLC., 2012

 

  1. FINRA, The Reality of Investment Risk, Financial Industry Regulatory Authority, Inc., 2016

 

  1. Deborah O’Malley and Melvin Pasternak, Compound Interest 101: How it Works, LearnVest, Inc., 2012

 

  1. Andrew Kuettel, Three Bills Proposing Amendments to the Federal Securities Laws Gain Traction in Congress, Dodd-Frank, 2016

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