1 Essential Question: Identify each of the different financial plans, and evaluate which one would be most beneficial to you at this stage of your life, Explain the difference between Financial Investment and Real Investment and explain which is better for the economy. Investing SECTION 2

2 Types of financial plans and purpose: spending and saving plan—to create a personal budget. This requires you to evaluate your spending habits with an eye to limiting them in order to save money. investment plan—to put money to work. Once you have established a savings account, you can use these funds to invest in stocks, bonds, or other investments. Investing SECTION 2

3 Types of financial plans and purpose (cont.) : retirement plan—to save and invest money for retirement. Once familiar with various investments (risk vs. return) determine age of retirement and predict the COL to know how much money you will need to make via investment. Estate (or living trust)- plan for how to distribute wealth towards the end of life or after death. Investing SECTION 2

4 Difference between financial investment and real investment: financial investment—exchanging property ownership and payments to make a profit real investment—using money to create new capital goods Investing SECTION 2

5 Real investment vs. Financial investment Financial investment reflects an exchange of existing money from one person to another, but does not support the creation of new wealth Real investment creates new wealth and is more helpful to our economy for its potential to spread that wealth and create wealth making abilities for others. Investing SECTION 2

6 Real investment vs. Financial investment (Example Financial investment- Purchasing a stock from another and then re-selling it to someone else once the value rises Real investment- purchasing land and developing a farm that will produce crops, employ people, and create a re-occurring profit for the owner of the land/farm. Investing SECTION 2