Re: Reserve Studies
From: Robert Heinich (robertenocommons.org)
Date: Sun, 6 Aug 2006 02:17:21 -0700 (PDT)
Brian,

However, $1 saved today in an interest-bearing account that matches the 4% 
inflation rate will be $2.19 20 years from now.  Assuming a constant rate of 
savings, one would have monies for more than the half the roof.  So it is a bit 
more complicated.

I confirmed with my neighbor, Laura Benedict, who presented at "Money Matters: 
Financial management in established communities" at the 2006 NatCoHo 
conference, that Eno Commons has its HOA reserves with Self-Help 
(www.self-help.org) earning a little above the current rate of inflation.

-Robert Heinich
 Eno Commons Cohousing
 Durham, NC
 where $40 of our $100 monthly HOA dues is for the reserve


----- Original Message ----- 
From: "Brian Bartholomew" <bb [at] stat.ufl.edu>
To: "Cohousing-L" <cohousing-l [at] cohousing.org>
Sent: Saturday, August 05, 2006 4:59 PM
Subject: Re: [C-L]_ Reserve Studies


> Do the reserve studies address the currency wearing out with age, too?
> I'd love to know what forms existing cohos are holding their reserve
> savings in, such as currency (whose?), stocks or bonds, so that in 20
> years it will be worth enough to do what it's been saved to do.
> 
> Let me wildly claim the rate of monetary inflation is 4% a year.
> This number is from the St. Louis federal reserve:
> 
> http://research.stlouisfed.org/publications/usfd/page3.pdf
> 
> 4 percent per year is 1.04^20 = 2.1911.  That means when you go to
> replace your roof in 20 years, your saved money will buy
> 1/2.1911 = .4564 = 46% = only half the roof.
> 
> Rather than discuss what the future rate of inflation might be, which
> is hard to predict, I would rather assume that monetary inflation will
> exist at between 3% to 10% a year, and ask how to save a reserve fund
> in that climate.
> Brian
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