Answer to Question #182516 in Microeconomics for Abdus

Question

Suggest the probable modes of investments to your parents in case of savings in the budget?

Answer 1

The following are probable modes of investment that I would suggest to parents in case of savings from the budget:

1. Saving for education.
2. Certificates of deposit.
3. Retirement plans.

Explanations.

Saving for education.

I would suggest that parents who have kids or who are planning to have kids in the future should start saving for education which is a mode of investment for the future. College fee is expensive and tuition fees continue to rise. It is likely that before your child heads off to school, the cost for your child is going to be even higher. Contributing to saving for education plan is a good investment for parents to start saving for the college fees.

Certificates of Deposit.

This is a very low-risk investment that I would also suggest to parents. With this type of investment, parents can purchase multiple certificates of deposit with different interest rates and maturity dates. As the certificate of deposit matures, you get your returns. You can decide to roll it over again into a new one and repeat the process.

Retirement plans.

I would suggest that parents should start saving very early for their kids or even for themselves. If a parent has an older kid who is working, then he or she should set the kid up with an individual retirement account (IRA). Parents will have control of this account until the kids becomes 18 years old depending on the rules of your state. The investment can be used for future plans after retirement.