California Department of Business Oversight  

Toll-Free 1-866-275-2677

www.dbo.ca.gov

THREE PARTS TO FINANCIAL SECURITY

3-6 months of living 

expenses

  CDs or money market 

accounts

  US Treasury Bills

$

$

Maturity

%

%

%

%

%

LO

NG-TERM

GOALS

SH

ORT-TERM

GOALS

TIP

In most cases, the younger y

ou are, the more you want to f

ocus 

on long-term growth by inv

esting in stock and stock funds

.

TIP

If you have to tap your emer

gency fund, 

it’s best to start rebuilding it as soon as the

 

emergency ends so you can dr

aw on the 

fund again if the need arises

.

To support a savings habit, it often helps to

 

arrange for a direct transfer periodically from

 

your checking to your savings account. That way

you won’t be so tempted to spend the cash.

STEP UP TO INVESTING

Like saving, investing helps protect your

  

financial security. But it differs from saving in

  

two significant ways:
1.   Most investments are not federally insured

  

and can lose value, which means you take a

 

certain amount of risk in investing that you

 

don’t take when you save.

2.   Over time investments as a whole, though not

 

every individual investment, have provided a

 

stronger return than savings. While there’

s no 

guarantee that history will repeat itself, it’

reasonable to assume that investing, if done

 

judiciously, can make the difference between

 

just getting by and meeting your goals.

 

Investing also requires 

learning enough about 

various types of invest-

ments—basically stocks, 

bonds, and the mutual funds 

and exchange traded funds 

(ETFs) that invest in stocks and

 

bonds—to make informed choices.

 

Stocks and stock funds are 

equity investments, which 

means you buy an ownership 

share when you invest. You may

 

earn dividend income on stock

 

investments and, if the price 

increases, you may decide to 

sell at a profit. But stock prices

 

aren’t fixed and can go down 

 

as well as up. 

Bonds have a fixed price if 

you buy at issue and hold until

 

maturity, and they pay interest

 

income, usually at a fixed rate.

 

But the prices change during

 

the term, so if you sell before

 

maturity, you may sell for more

 

or less than you paid to buy.

With any investment, if you 

sell when the price is less than you paid, you’ll

 

lock in a loss. 

LEARNING THE INVESTING

 ROPES

The best approach to investing is to learn

  

as you go. A number of websites, including

  

www.investor.gov and some state regulators’

 

websites, offer clear, unbiased information about

 

investing and provide links to other resources.

 

Also, find out if your credit union or bank pro

-

vides investor seminars, and check to see if local

 

schools or libraries offer introductory courses on

 

investing. Be cautious, though, of seminars that

 

are really fronts for selling specific investments.

If you’re feeling financially 

stressed—which can happen when

 

you’re juggling work, education,

 

and family responsibilities—

 

saving and investing may be the

 

last things on your mind. Yet both

 

are essential to your financial

 

security and the security of the

 

people who depend on you. And

 

getting started doesn’t require a

 

big commitment of money or time.

EMERGENCY FUNDS

Financial emergencies have a

 

nasty way of cropping up at incon

-

venient times: Your car needs a

 

major repair, the refrigerator dies,

 

or, worse yet, you or your spouse is

 

out of work for several months and

 

you need money to cover the mort

-

gage or other regular expenses.

 

Other unexpected events—

even pleasant ones, such as your parents’

 

anniversary party or a chance for your children to

 

go to a sports or music camp—can foul up your

 

spending plan. 

Of course, you could put some of these

 

expenses on a credit card. But you risk increasing

 

these costs significantly if you pay off the bills

 

over an extended period. And, in the worst cases,

 

the expense may put you over your line of credit.

 

The better solution is to build an emergency

 

fund—sometimes called a rainy-day fund—by

 

saving a regular amount from each paycheck until

 

you hit your target. As a rule, your emergency

 

fund should provide a minimum of three to

  

six months of living expenses in easily accessible

 

accounts, such as certificates of deposit (CDs),

 

13-week US Treasury bills, and money market

 

accounts. 

Easily accessible accounts are liquid, which

 

means you can sell or redeem them quickly for

 

cash with little or no loss of value. In addition to

 

being liquid, these accounts are either federally

 

insured or, in the case of Treasury bills, backed

  

by the government’s promise to repay

.

With CDs, you can use a technique called

  

laddering. Instead of putting your entire emer

-

gency fund in one CD, you can split the money

 

among three or four one-year CDs that mature at

 

regular intervals during the year

. The staggered 

maturity dates reduce the risk of having to take

 

an early withdrawal. If there’

s no emergency, you 

can roll the CD over for another term.

 

OTHER REASONS TO SAVE

Once you have an emergency fund, saving can also

 

help you meet short-term goals, such as the down

 

payment on a new car or the money to pay for a

 

family vacation. Saving is all about putting away a

 

regular amount on a regular basis. Sure, you may

 

earn some interest, but what really builds your

 

account value is regular cash infusions.

 

Saving and Investing

Putting money aside can help meet emergencies and long-term goals.

STOCKS

MUTUAL FUNDS &  

EXCHANGE TRADED FUNDS

BONDS

TYPES OF INVESTMENTS

SAVINGS ACCOUNT

VETERANS HANDBOOK

VETERANS HANDBOOK

16

17

THE VETERANS HANDBOOK

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Lightbulb Press, Inc.

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