Learning, Earning, and Investing Investment Basics

1. Learning, Earning, and InvestingInvestment Basics

2. Funding for this workshop is provided by: National Council on Economic Education US Dept of Education University of Illinois Extension

3. Instructors • Dr. Angela Lyons, Associate Professor University of Illinois Urbana-Champaign (217) 244-2612; anglyons@uiuc.edu • Debra Bartman, Extension Educator Quad Cities Center (309) 792-2500 (x217); dbartman@uiuc.edu • Patricia Hildebrand, Extension Educator Effingham Extension Center (217) 347-5126; phildebr@uiuc.edu

4. Objectives • Introduce: (1) Learning, Earning, and Investing (2) The Stock Market Game (3) Plan Well, Retire Well • Experience activities to use in the classroom • Answer questions about curriculum and other resources

5. You will receive… • Curricula with lessons and activities to use in the classroom • 6 CPDUs • Certification to reproduce and replicate workshop materials • Network of colleagues to share experiences • Resources available at U of I Extension

6. Why Is Saving and Investing Education Important? Setting the Stage….

7. Increasing Consumer Responsibilities • Movement towards the privatization of social security. • Over 92% of pensions today are defined contribution plans, not defined benefit plans.

8. Financial World Has Become More Complex • The number of financial services offered to consumers has increased. • There has also been an increase in the number of financial products that are offered. • Credit-scoring technology has improved.

9. People Are Involved in the Financial Markets • Millions of small investors have increased their net worth by participating in the stock and bond markets. • Millions of other investors depend on income from owning stocks and bonds.

10. Importance of Financial Education Many Americans, especially young adults, lack the basic knowledge and skills needed to make informed financial decisions and manage their investments effectively.

11. It’s Hard to Learn What You Are Not Taught • Financial education is a growing national priority. • Stock market simulations and games are very popular. • But young people can’t learn financial skills unless they are taught explicitly.

12. Several studies of financial education programs, especially those with specific objectives such as increasing savings or decreasing debt, have succeeded in improving the financial behaviors of young people and other consumers.

13. Where Do You Find Data? The Federal Reserve Board http://www.federalreserve.gov/ Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore. 2006.“Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances.” Federal Reserve Bulletin, vol. 92, pp. A1 – A38.

14. Learning, Earning and InvestingAn Overview • 23 lessons • High school and middle school • Complete lesson plans • Web site (http://lei.ncee.net) • Accompanies stock market simulations or games • Linked to standards: NCEE, NCTM, Jump$tart • Field tested and reviewed

15. Why Save? Investors and Investments Invest in Yourself What Is a Stock? Reading the Financial Pages: In Print and Online What Is a Bond? What Are Mutual Funds? How to Buy and Sell Stocks and Bonds Table of Contents Theme 1: Basics of Financial Investing

16. What Is a Stock Market? • The Language of Financial Markets • Financial Institutions in the U.S. Economy Theme 2: The Markets

17. Building Wealth Over the Long Term • Researching Companies • Credit: Your Best Friend or Your Worst Enemy? • Why Don’t People Save? • What We’ve Learned Theme 3: Financial Planning

18. How Financial Institutions Help Businesses Grow • How Are Stock Prices Determined? • The Role of Government in Financial Markets • The Stock Market and the Economy: Can You Forecast the Future? • Lessons from History: Stock Market Crashes • Investing Internationally: Currency Value Changes • Investing Involves Decision Making Theme 4: The Markets and the Economy (High School only)

19. Description Key concepts Objectives Time required Materials Procedure Visuals Activities Closure Assessment (multiple-choice and essay) Lessons * Glossary terms for all lessons (pp. 323-332)

20. About the Materials: Table of Contents Sample Lessons FAQs Order Information Resources: Interactives Related Web Links Related Lessons Glossary Visuals on PowerPoint State Stock Market Games Key Featuresof theLEI Web Site

21. Web Site: http://lei.ncee.net

22. Table of Contents: Lessons Concepts National Standards

23. Resources: Interactives Investment Web links Related Lessons Visuals Stock Market Simulations Workshop Leader’s Guide

24. LEI Lessons Lesson 4: What is a Stock?Lesson 7: What are Mutual Funds?Lesson 12: Building Wealth for the Long-TermLesson 15: Why Don’t People Save?Lesson 18: How Are Stock Prices Determined?

25. Lesson 4 What is a Stock?

26. Income, Saving and Investing • Households earn income. • Income is payments received by a household by selling or renting productive resources. • Households usually spend some of their income and save some of it. • Saving is income not spent on consumption or taxes. • Some households use their savings to purchase stocks.

27. Activity 1: Certificate of Ownership (p.42) • Students work in small groups that are households. • For each correct T/F answer, students receive a strip of paper worth 15 shares of stock in The Economics and Mathematics Knowledge Company. • Groups that answer all questions correctly receive a stock certificate worth 150 shares. Groups that answer fewer questions correctly receive fewer shares.

28. Visual 1:Mathematics and Economics Questions Question 1. Stocks represent ownership in a corporation.

29. Answer 1. True. Stocks are shares of ownership in a corporation.

30. Question 2. 50% written as a decimal is 5/100.

31. Answer 2. False. 50% written as a decimal is .5.

32. Question 3. Mark bought 100 shares of Nike stock, and each share sold for $35.50. If no fees were involved, Mark paid $3,550 for the shares.

33. Answer 3. True. 100 x $35.50 = $3,550.

34. Question 4. If Jenny has $100 in a savings account and earns 2 percent interest this month, she has earned $20 in interest.

35. Answer 4. False. 2 percent of $100 = $2.00

36. Question 5. The closing price for a share of Wal-Mart stock was 37.25. This means that the price of the share was $37 and one-quarter of a dollar. One-quarter of a dollar is .20.

37. Answer 5. False. The closing price for a share of Wal-Mart stock was $37 and one-quarter of a dollar. One-quarter of a dollar is .25, not .20.

38. Question 6. People who own stocks are guaranteed a return on the money they have invested in stocks.

39. Answer 6. False. Investing is stocks involves risk. Less risky investments are savings accounts and government bonds.

40. Question 7. The only way stockholders make money is through dividend payments while they own the stock.

41. Answer 7. False. Stockholders make money through dividend payments or by owning stocks that increase in value.

42. Question 8. One way stockholders make money is to sell their stock for more than they paid for it.

43. Answer 8. True. A common way for stockholders to make money is to sell their stock for more than they paid for it.

44. Question 9. Stockholders can reduce the risk on their stock investment by diversifying their portfolios.

45. Answer 9. True. A common way for stockholders to reduce risk is by owning stocks in a variety of corporations.

46. Question 10. The New York Stock Exchange is the only place where people can buy and sell stocks.

47. Answer 10. False. In addition to the New York Stock Exchange, people may buy stocks on the American Stock Exchange and the NASDAQ.

48. Shares and Dividends • Calculate shares • Calculate dividends • Dividends are equal to 1/5th of a share • 15 shares = 3 pieces of candy (1/5 X 15 = 3) • 30 shares = 6 • 45 shares = 9 • 60 shares = 12 • 75 shares = 15, etc….

49. Wrap-Up • Role playing (Activity 2) • Closure (discussion questions) • Assessment (multiple choice and essay)

50. Lesson 7 What are Mutual Funds?