Saving when young makes for wealth when old


START YOUNG! "Since money at 8 percent doubles every 9 years, a child who, at 18, saves $2,000 a year in an IRA at 8 percent will, at 65, have more than double the savings of someone who waits till 28 -- $1,059,000 vs. only $476,000. Thus, an early start brings $583,000 in extra wealth resulting from just a $20,000 investment.


"A child who saves $2,000 annually in an IRA from 18 till 26 -- and then stops -- will have more at 65 than one who starts at 28 and puts in $2,000 every year until 65 -- by $66,000 -- or $542,000 vs. $476,000." (Ernst & Young.)

FIVE MONTHS TO GO: "We weren't surprised when we polled 133 top CEOs to find in the presidential race that they overwhelmingly supported Sen. Bob Dole over President Clinton. Results: Dole 71 percent, Clinton 26 percent, no one 3 percent." (INC, June.)


MONEY-SAVER: "Put a timer near your phone. We don't realize how long we talk, but long-distance charges quickly add up. When dialing, start the timer. Set timer for limited period; when it goes off, end your conversation." ("Money Smarts," by David Scott, $9.95.)

BE CAREFUL: "Should You Lend Money to Relatives?" asks McCall's, June. Excerpts: "Don't kiss your cash goodbye. One-third of the people who lend more than $500 to relatives never get repaid. Difficulties may not be purely financial; repressed tensions can resurface.

"If you want to help, draw up a co-signed agreement specifying exact repayment schedule. Charge interest at the IRS rate. If the loan isn't repaid, it may be tax deductible." (Psychiatrist Ellen Platt of Annapolis, contributed to the McCall's article.)

LOCAL LINE: Alex. Brown has a "Strong Buy" report on Consolidated Stores, summarized in this week's (June 3) Barron's. ("It will become much larger as it expands its still-regional closeout and toy businesses.")

INFLATION'S BITE: "Starting in 1976 -- just 20 years ago -- your dollar, by 1980, was worth 64 cents. By 1985, 51 cents, by the end of last year 36 cents. Looked at another way, by Dec. 31, 1995, it would have taken $2.77 to equal the buying power of a 1976 dollar." (CNN News.)

HOW TO COPE: Remember that over the years stocks have gained, on average, 10.2 percent a year, bonds and certificates of deposit have gained 5.6 percent, Treasury bills 3.7 percent. Conservative strategy: Have some of each.

WHICH DID BEST? Speaking of stocks, U.S. issues have forged ahead of foreign stocks. Earlier this year, they were neck-and-neck in Business Week's latest "Relative Portfolios." Starting a year ago, $10,000 in U.S. stocks grew to $12,900, in foreign stocks $11,333.

TOP HOLDINGS: As of March 31, Jeffrey Vinik's 10 top Fidelity Magellan holdings: Treasury bonds (five issues, maturities 2005 through 2026), Chrysler, General Motors, Caterpillar, Digital Equipment, Deere.


The top 10 holdings of Fidelity Growth Co. Fund, managed until now by Bob Stansky, the new Magellan chief: General Electric, Fannie Mae, Philip Morris, Oracle, Citicorp, U.S. Robotics, Cisco Systems, Chrysler, Lowe's, American Express. (More on this in the new Business Week, June 10. Note: No bonds are in Mr. Stansky's top holdings.)

FINAL QUICKIES: "Did you know that more American workers now make computers than automobiles?" (Entrepreneur.)

"I just told the purchasing department not to buy paper clips. We get documents daily with clips." (Alan C. "Ace" Greenberg, CEO, Bear Stearns.)

"Aggressive growth funds in April took in a net $7 billion. No wonder small stocks performed so well." (Ned Davis Research.)

"IRS Targets 401(k) Plans. It's Bad News." (Headline in INC, June.) More on this Friday.

Reminder: June 17 is the deadline for your second installment of 1996 estimated Federal and Maryland taxes. Maryland had mistakenly announced a mid-July deadline, but corrected it by mail.


"As your job interview begins, try to have 'small talk,' giving you clues about your interviewer's likes and dislikes. Then dive into your credentials." (Glamour, May.)

"Talk to your broker about convertible bonds. They can pay off like stocks." (Smart Money, June.)

"The Nasdaq and Russell 2,000 indexes trailed the S&P; 500 and the Dow in January, usually a strong indicator they will lag for the year." (Financial World, June 17.)

Pub Date: 6/05/96