1. Saving and Investing

2. Why People Save Large purchases, emergencies, college, retirement
People save money in order to make down payments on large purchases they make on credit, like homes and automobiles
No down payments = larger monthly costs, small down payments = higher interest

3. How People Save Various ways to save money
Regular savings accounts
Certificates of Deposit (CDs) are issued by banks and other financial institutions
Savers invest a certain amount of money for a specific period of time
The longer the money is put into and kept in the CD, the more interest you will be paid on it

4. Stocks and Bonds
Stocks and bonds are two of the most popular investment techniques
Bonds- certificates of debt issued by the govt. or a corporation to people who lend them money
When the bond reaches maturity, you get the money back plus interest
Safe form of investment and regularly earns you interest
Interest rates on bonds may not be as high as other forms of investment because of the low level of risk

5. Stocks and Bonds
Business organizations who buy and sell stocks for their customers are known as brokerage houses
Each brokerage house is a member of a stock exchange
Millions of shares of stocks are bought and sold every day at a stock exchange
Stock prices depend on expectations of how well a company is or will perform, which make stocks a risky investment
You should have a good working knowledge of the stock market before deciding to invest in stocks

6. Stocks and Bonds
Common stocks often pay small dividends, or sometimes none at all
Value of the stock may fall on the stock market, costing you money
To reduce these risks, people buy shares in mutual funds that are managed by people familiar with the stock market
Buying a share in a mutual fund means you own a small piece of a large number of different stocks

7. Money Market Funds
Money market funds work similarly to mutual funds by buying stocks individuals could not purchase alone
Savers can withdraw their money at any time
Money market funds do not guarantee a specific rate of interest
These savings are also not insured by the government

8. Savings in the Economy
Money in savings accounts, bonds, stocks, etc. etc. is used to help expand the U.S. economy
Economic growth occurs when producers are continually expanding
Expansion requires capital to pay for new factories, machines, workers, etc.
Capital used for expansion come from individuals’ savings
Banks use the money you deposit in savings to make loans to businesses

9. Raising Capital Saving and investing are NOT the same
Money in a piggy bank is saved, not invested
Money you put in a savings account is both saved and invested
When you invest, you turn your money into capital- used by companies to produce goods and services
Ability of American businesses to raise large amounts of capital helps keep our country prosperous
Therefore, your saving habits contribute to the economic well-being of the country

10. Raising Capital Businesses also save money to raise capital
Put aside a certain portion of profits before paying dividends to stockholders
Money is reinvested into the business in the form of new capital
New machines, factories
Open up new branches
New lines of products
This new capital is in addition to the money set aside for maintenance and replacement expenses

11. Protecting Savings
Federal and state government have passed laws to regulate the activities of institutions that handle the money/savings of others
Government only charters banks that are properly organized and have enough capital
After banks are chartered, they are inspected regularly by state and federal officials
Directors are responsible for ensuring that their banks obey all banking laws
But what happens to the savings that people have deposited into a bank that fails?

12. Insuring Savings
Most savings are now protected by the federal government
FDIC and the NCUA
If any member bank or credit union of the FDIC or NCUA fails, depositors will be paid the amount of their deposits up to $100,000

13. Regulating Stock Exchanges
Securities and Exchange Commission (SEC) ensures all offerings of stocks and bonds on the stock exchanges are honest
Regulations of SEC designed to stop fraud and deception on the stock exchange
Does NOT mean all stocks are safe investments or that all brokers are honest

14. Regulating Savings Organizations
All of the country’s savings organizations come under state or federal supervision
Banking practices are closely monitored
Savings and loans associations are regulated
Company credit unions must allow govt. accountants to examine their records and operations
Congress is also considering new regulations for retirement plans
Savings are important to the prosperity of the U.S.- very important individual savings be protected

15. ? How do bonds work? What determines the value of a stock?
How are individual savings connected to business capital?
What is the difference between saving and investing?
What is the role of the FDIC and NCUA? What is the role of the SEC?