Saving and Investing Notes

Saving and Investing Objectives Explain factors that influence the amount of money earned at a financial institution

Discuss different investment options

Sources of Income Work Wealth

To get wealth, you must save. How much you save depends on: Income Expectations Current interest rates Tax laws on savings

Factors in Saving Safety How much risk is there? Could I lose my money? Liquidity How easy is it to turn the investment into money?

Rate of return Interest rate Compounding – how often the interest is calculated Yield – the % gain on my investment taking interest and compounding into account

Types of savings devices Savings Accounts Passbook –Safe, low rate, liquid

Another Savings Account Certificate of Deposit (CD) Money is deposited for set period of time Safe, good rate, not liquid

Yet another savings account Money Market Safe, low rate of return, liquid Can write checks Minimum balance required

Pension funds Retirement accounts such as IRAs and 401(k)s Corporate stocks Ownership in a company where you’re paid a dividend or can make a capital gain

Mutual Funds Investing in stocks and bonds pool savings diversity

Corporate bonds Investor “lends” money to a corporation. Will be paid back with interest.

Government Bonds (federal) –Investor “lends” money to federal government Will be paid back with interest.

Municipal Bonds (local) Investor “lends” money to a local government entity (school district, city). Will be paid back with interest.