Presentation Transcript

1. Please… Please find a laptop in the back If you are having trouble logging in, please raise your hand Please go to ‘moodle.ltsd.k12.pa.us’ to get to Moodle Log into Moodle and complete today’s Bell Ringer You may need to open last week’s Notes to help you!
2. Bell Ringer What are the three rules for investing? Start Early Give money time to grow Buy and hold Leave your money invested Diversify Don’t put your eggs all in one basket
3. Bell Ringer Using the simple interest equation, figure out how much interest you would earn in the following scenario: You invested 500 in a 2% interest account for 10 years Interest = 500 x .02 x 10 Interest = $100
4. Bell Ringer Using the compound interest calculator, figure out how much interest you would earn in the following scenario: You invested 500 in a 2% interest account for 10  years. Interest = $109.50 How much more would you earn if you added 100 annually to the investment above? Interest = $226.37 How long would it take you to double your money if you had an account that gave you 3% interest? # of years = 72 divided by 3 # of years = 24
5. American’s save too little US Bureau of Labor Statistics reports that we spend on average 97% of our disposable income. What is disposable income? It is after-tax income. What we actually bring home as a paycheck. For teens it may be money from allowance, money received as a gift or money earned doing odd jobs. In other words we only save 3.%
6. Disposable Income and Saving Disposable income = consumption + saving Money Brought Home = What is spent on goods and services + what is saved. Saving = disposable income – consumption What is saved = money brought home – what is spent on goods and services.
7. Pay Yourself First What do you think it means to “Pay Yourself First”? A person saves before spending money on goods and services What are some reasons why people save? to gain the satisfaction of purchasing a special gift to make large purchases (car, house, college, etc) to meet emergencies that might arise because the money will be matched by someone
8. Starting Early - Anna
9. Starting Late - Shawn
10. Answers How much money did Anna invest in 45 years? $93,600 What was Anna’s savings (ending balance?) $1,062,137.57 How much money did Shawn’s invest in 45 years? $72,800 What was Shawn’s savings (ending balance?) $455,540.33
11. Rule #2: Buy and Hold In order to leave money in savings or investments, you have to do these things: Spend less than you receive. How? Perhaps you could…. Earn more by improving your formal education or job skills. Spend less by using a budget to keep track of where your money is going. Become connected to financial institutions. How? Open and maintain accounts at mainstream financial institutions – banks, credit unions, and brokerages. Manage your credit responsibly. How? Limit the number of credit cards you have. Limit your purchases to what you can pay off each month. Apply for loans when you are confident that your current income, will allow you to repay the loan.
12. Rule #3: DiversifyDon’t Put All Your Eggs in One Basket If you put all your money in one stock and a disaster occurs -- it will hit you hard. With your money spread out across a variety of assets you are not hurt as badly when any one asset does poorly. Mutual funds provide one means by which investors can easily diversify. Pools investor’s money Allows people in effect to own small amounts of many different assets Enable investors to avoid the risk that comes from owning any one asset
13. Forms of Saving and Investing Savings Accounts Provide a small but steady return. Certificates of deposit (CD’s) Lending money to a bank for a certain amount of time. Very safe, but instant access carries a penalty. Bonds Lending money to a corporation or government for a certain amount of time, with a promise of higher returns than those offered by bank savings accounts and CD’s. Stocks Part ownership in a company, offering higher risks, and potentially higher returns than some other investments. Real Estate The risk and benefits of being a landlord.
14. Risks and Rewards Highest Risk – Highest Potential Return or Loss Lowest Risk – Lowest Potential Return or Loss
15. Advantages and Disadvantages of Alternative Forms of Saving and Investing Savings Accounts Pro – safe investment Con – small return Certificates of Deposit Pro – safe investment Con – penalty if you withdraw the money early; small return Bonds Pro – safe investment Con – return on money takes many years
16. Advantages and Disadvantages of Alternative Forms of Saving and Investing Stocks Pro – chance of higher return Con – higher risk Real Estate Pro – almost always good investment with chance of a high return Con – duties that come with a landlord; small chance of loss (if a landfill opens up near your property; market tanks, etc)
17. Vocabulary for Investing(what you should consider before you invest) Liquidity – the ease with which savings or investments can be turned into cash Risk – the chance of losing some or all of the money invested Return – Earnings from an investment