1. MoneyCounts: A Financial Literacy Series
Saving and Investing
11-A Grange Building
University Park, PA 16802
financialliteracy.psu.edu

2. Description
As we live in a complex world today, the realm of saving and investing for your future is just as complex.
Complex and confusing financial products are necessary vehicles as you build a foundation for your future.
You need basic knowledge to make informed decisions about how to proceed with your saving and investing plans.

3. Learning Outcome Understand the concepts of saving and investing
Explore a variety of saving and investing vehicles and options
Evaluate risk tolerance and return on investment decisions
Plan for retirement through saving and investing

4. You Work for Money
Money Works for You

5. Compound Interest Compound interest A = P (1 + r/n) (nt)
A = the future value of the investment/loan, including interest P = the principal investment amount (the initial deposit or loan amount) r = the annual interest rate (decimal) n = the number of times that interest is compounded per year t = the number of years the money is invested or borrowed for

6. FV = PV x (1 + (i / n)) ^ (n x t)
Time Value of Money
Future
Present
FV = Future value of money PV = Present value of money i = interest rate n = number of compounding periods per year t = number of years
FV = PV x (1 + (i / n)) ^ (n x t)

7. Susan invests $5,000 annually between the ages of 25 and 35
In total, she invests $50,000
$1,142,811
Bill invests $5,000 annually between the ages of 35 and 65
In total, he invests $150,000
$602,070
Chris invests $5,000 annually between the ages of 25 and 65
In total, he invests $200,000
$540,741

8. Save, Invest, or Both?
Saving
Investing OR
It Depends !

9. What does money mean to you?
Your style
Your job
Emergency fund
Your meaning of money
Your budget
Your age
Your debt
Family situation
Retirement account
Your goals

10. Save, Invest, or Both? Interest Rate Total Debts Living Standard
It Depends!
Goals
Risk Tolerance
Time Horizon

11. Savings Vehicles Investment Vehicles
Low Return
High Safety (Low Risk)
Savings Vehicles
High Return
Low Safety
(High Risk)
Investment Vehicles
Saving account
Checking account
Money market account
Certificates of Deposits
Bonds
Stock
Mutual funds
Real estate
Commodity

12. Risk versus return

13. Tolerance level of risk
Alternative
Protected Equity
Equity
Bonds
Property
Return
Cash
Risk

14. Profit versus loss

15. Diversification

16. Diversification reduces risk!

17. Diversification

18. Retirement Accounts/Plans

19. Major Plans!

20. Retirement Accounts

21. Retirement Accounts

22. The end game!

23. MoneyCounts: A Financial Literacy Series
Comments and questions
11A Grange Building
University Park, PA 16802
financialliteracy.psu.edu