Discussion

Savings

The Fundamental Accounting Equation in chapter 14 (pg. 315) states that if domestic investment exceeds domestic savings then we will have a trade deficit. In the United States we have a large trade deficit as we import a lot more from other countries then we export to other countries abroad. At the same time we have seen simultaneous increase in the government budget deficit and decrease in the national savings rate. For this discussion please describe possible reasons for this phenomena. Additionally, I want you to share with the class something you would like to save money for and provide a plan for how you can get started towards achieving your goal.

Give at least one reason why the US has seen either an increasing in the government budget deficit or a decrease in the national savings rate.
Suggest something the government could do or change to decrease the national budget deficit.
Describe something you would like to save money for in the future ((or something you are currently saving for now).
Be specific in describing what you are saving for.
How long do you have before you will need the money you are saving?
Is there anything you stopped buying  to help raise funds?
Your post should be 200-300 words long
Reply to the posts of at least two classmates (50-75 words)

Note:  I am not looking for a political rant about recent election results or your thoughts about any particular political party. What I am looking for is at least one reasonable and well thought out suggestion for how the government can decrease the deficit. Something as easy as raise taxes or cut spending is all I am looking for. Of course, I want you to be specific and elaborate beyond just saying raise taxes or cut spending by stating what or who the government should tax and/or what programs or services you would eliminate to reduce spending. I also want you to give an example about something you would like to save money for. I have included an example about saving for my son’s college education below.

Example about saving: I am currently saving money for my three year old son’s college education. I am hoping to save up around $150,000 for my son’s college education before he turns 18. This means I need to save around $2500 per year to put into his account. Now I know $2500×18 is less than $150,000 so I am investing money into a mutual fund that gives about 12% interest per year (on average). At 12% my invested money will double every 7 years. So using the power of compound interest I should be able to generate around $157,000 by the time my son turns 18. I am using what is known as a 529 plan to save for my son’s education. This plan allows me to save money and collect interest that is tax free and will not be subject to capital gains tax. It is similar to an I.R.A. or 401K but it is specifically designed for college savings for your children. Every state has one of these plans and you can choose whichever one you want from all 50 states (I actually use Utah’s plan). To save money I have had to cut back my spending on a lot of other things. I think the clearest thing I can recall that I did to save money was stop drinking Starbucks coffee as often as I did. I used to drink a Coffee Frappuccino every morning and this drink costs about $5. By stopping drinking Starbucks in the morning I was able to save over $25/week. This amounts to over $100/month and about $1200/year. So by simply stopping to buy Starbucks everyday I was able to come up with about half the savings for my son’s college education.

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