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Mastering Saving and Investing: Financial Literacy Insights

This presentation is designed to enhance your understanding of financial literacy, focusing on the essential concepts of saving and investing. Explore key topics such as the time value of money, compound interest, and the risk-reward tradeoff. Learn to calculate your investment potential using the Rule of 72 and identify different types of investments. Dive deep into the importance of diversification to manage risk effectively. Follow the structured exercises to reinforce your knowledge and prepare for a financially savvy future.

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Mastering Saving and Investing: Financial Literacy Insights

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  1. Saving and Investing Student Name: Financial literacy– mrs.pollison

  2. Instructions: • Save PowerPoint presentation on your P drive, Financial Literacy folder • Add your name on title slide • Refer to: NEFE High School Financial Planning Program student guides on desk • Unit 3: Investing: Making Money Work for You, pgs 27-39 • Fill in the missing information on the PowerPoint • Print: on 3005 printer (black); handouts; 6 per page

  3. Saving and investing • Investing - • Saving -

  4. The time value of money • Definition: • Interest Formula: • **Complete Exercise 3B: The Power of Compounding, pg 30, in Student Guide, 8% only row.

  5. Show me the money!! • The power of compounding works both ways! • Procrastinating costs you compound interest and less money for your goals! • Compound interest is: • Compound interest formula:

  6. The Rule of 72 – divide 72 by the interest rate or number of years to see how long it will take to double your money. Solve the following: $100 investment, 24 years – what rate to double? $100 investment, 8% - how many years to double? $100 investment, 11 years – what rate to double? $100 investment, 7.75% - how many years to double?

  7. Risky businessAll investments involve some element of risk! • What is risk? • Risk-Reward Tradeoff – describe it! • Check out the Financial Planning Pyramid on pg 33. • List 2 low risk investments: • List 2 high risk investments: • List 3 medium risk investments: • Complete Exercise 3D: Risk versus Reward, pg34 • Who has a lower-risk investment program?_____________________ • Who has the potential for higher earnings?_____________________ • What is each person’s highest-risk investment? Carrie_______________________ Darren__________________________ • What is each person’s lowest-risk investment? Carrie________________________ Darren__________________________

  8. Income investments: (brief definition) • Savings accounts • US savings bonds • Certificates of deposit • Money market deposit accounts • Money market mutual funds • Corporate and government bonds

  9. Growth investments: (brief definition) • Stocks • Real estate • Collectibles • Mutual funds

  10. Diversification: (read only) • Reducing investment risk by putting money in several different types of investments. • “Don’t put all of your eggs in one basket.” • Spread your money around – reduce risk! • Example: mutual fund

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