2. Review WHAT DID YOU LEARN LAST WEEK? www.hsfpp. org (c) 2012 National Endowment for Financial Education | Lesson 1-4 Spending Plan1

3. Put Savings to Work SELECT SAVINGS OPTIONS THAT WORK FOR YOU 2©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work

4. What Does it Mean to be Wealthy? ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work3

5. Preview Today we will answer these questions: What is the difference between saving and investing? What are the different ways I can invest money? How do I get started with investing? Use what you learn today to weigh the risks and rewards of investing. 4©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work

6. Meet Whitney and Justin Whitney– senior Works part-time Spends most of her money on clothes and going out with friends Doesn’t stick to her savings plan Justin– 8 th grader Earns money from occasional odd jobs in neighborhood Father was recently laid off from job Is saving money for college ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work5

7. Save vs. Invest ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work6 Alike Plan to use money later Keep ownership ? Save Store money somewhere to avoid spending now Original amount always available (unless stolen, lost, or destroyed) Insured if kept in a bank account Invest Use money with expectation that it will make a profit (Ex: stock, rental property, business) Not all investments are insured No guarantee that original amount will be available if value of investment drops (except bank accounts) Alike ? Save ? Invest ?

8. Millionaire Myth #1 – True or False? Millionaires usually work in sports, entertainment or lead gigantic Fortune 500 companies.  Athletes and entertainers are notorious for squandering their money until they’re broke. Actually, half of all millionaires are self- employed or own a business. Source: Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. The Millionaire Next Door: The Surprising Secrets of America's Wealthy, 1996 ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work7

9. Millionaire Myth #2 – True or False? Millionaires made their fortunes the easy way— inheriting it.  Only 20 percent of millionaires inherited part of their money. And half of those inherited less than 10 percent of their assets. 1  In fact, 76 percent of millionaires said “smart investing” is one of the top three factors contributing to their financial success. The other two critical elements are hard work and education. 2 1 Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. The Millionaire Next Door: The Surprising Secrets of America's Wealthy, 1996 2 Spectrem Group, 2012 Affluent Market Insight www.millionairecorner.com/article/smart-investing ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work8

10. 3 Steps to Build Wealth ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work9 1. Make enough money to cover essential expenses and have something left to save and invest. 2. Have a plan to save and use part of your income to invest. 3. Invest to put money to work for you.

11. Sources of Income for Teens ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work10 Sources of Income AllowanceJobInterest? Gift Money Earned Interest ?

12. Windfalls What are your windfalls? Use unexpected increases in cash to save and invest. ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work11

13. Savers are Related to Borrowers Savers Deposit money Credit Union Bank Store money Lend money Borrowers Borrow money ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work12

14. Time is Money

15. Watch it Grow Let’s say you have $1,000 saved in an account that earns 3 percent interest once a year. What is the balance and the compounded interest earned each year over five years? ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work14 The Mighty Power of Compounding Year Interest Earned Ending Balance Beginning$1,000.00 1$30.00$1,030.00 2$30.90$1,060.90 3$31.83$1,092.73 4$32.78$1,125.51 5$33.77$11,59.28 Without any physical effort on your part, your money has “worked” to earn you how much interest? The Mighty Power of Compounding Year Interest Earned Ending Balance Beginning$1,000.00 1?? 2?? 3?? 4?? 5??

16. Interest-Earning Savings Options Bank or Credit Union Savings Account Money Market Deposit Account (MMDA) Certificate of Deposit (CD) www.treasurydirect.gov U.S. Savings Bond ©2012 National Endowment for Financial Education | Lesson 4-1 Put Savings to Work15

17. How Investing Works START INVESTING NOW TO REAP THE BENEFITS

18. It costs how much? I remember when ____ used to cost only $____ 17©2012 National Endowment for Financial Education | Lesson 4-2 How Investing Works

19. Preview When should I start investing? What are some guidelines to follow when investing? How do I buy stock? Use what you learn today to make decisions about stock investments. 18©2012 National Endowment for Financial Education | Lesson 4-2 How Investing Works

20. Inflation 19©2012 National Endowment for Financial Education | Lesson 4-2 How Investing Works

21. Time Value of Money (TMV) Yesterday’s  T oday’s  Tomorrow’s 20©2012 National Endowment for Financial Education | Lesson 4-2 How Investing Works

22. Time is Money

23. Invest Now or Later? Which is better? A. Start investing a little now. B. Wait a while to invest more later. 22©2012 National Endowment for Financial Education | Lesson 4-2 How Investing Works

24. What Would You Choose? $1,000,000.00 cash today 1¢ today that doubles in value each day for 30 days OR $5,368,709.12

25. Reasons to Invest An income investment provides expected earnings, usually in predictable amounts. Earned interest – payment received in return for use of your money Dividends – share of profits some companies pay to their stockholders Rent payments – received from people or companies in return for using your property Growth investments are purchased because of the potential that the value will increase over time; an unpredictable amount of money is received when the investment is sold. Real estate Business Crops Precious metals ©2012 National Endowment for Financial Education | Lesson 4-3 How Investing Works24

26. Choosing Investments ESTABLISH INVESTING RULES 25©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments

27. Preview Are there other ways to invest other than buying stock? Isn’t investing risky? How much risk am I willing to take on when investing? Are there ways to reduce the possibility that I’ll lose money on my investments? Use what you learn today to set up rules for investing. 26©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments

28. Risk Meter ©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments27 Certificate of Deposit Start-Up Stock

29. The Language of Investing Asset  something of value that can be turned into cash Examples: stock, home, lake-front property, business Liability  something owed to another person Examples: loan, rent Rate of Return  degree to which an asset gains (or loses) value over a given period of time Examples: APY interest on savings, stock value increase/decrease Risk  uncertainty of achieving a desired result ©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments28

30. Take the Risk Your risk tolerance depends on … – When you need the money (short-term or long-term) – Your financial goals – Your ability to live with any investing decisions with unpleasant consequences Tame the risk – Be sure you can cover your necessary financial needs – Know what you are getting into before you invest – Invest in different types of investments ©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments29

31. Diversify to Tame Risk Don’t put all your eggs in one basket. Invest in a combination of asset categories: – More than one asset (Example: not all Facebook stock) – Variety of assets (Example: not just Certificates of Deposit) Mix investments within an asset category: – Different industries (Example: not all retail) – Different-sized companies (Example: not all small) Divide investments among several “baskets”. ©2012 National Endowment for Financial Education | Lesson 4-3 Choosing Investments30

32. Investing Strategy SET GOALS FOR SAVING AND INVESTING 31©2012 National Endowment for Financial Education | Lesson 4-4 Investment Strategy

33. Wealthy Habits 1. Take on an “earn to invest” mentality. 2. Focus on your lifestyle and financial goals. 3. Persevere—Don’t be a quitter. 4. Let your mistakes be lessons. 5. Look for value. ©2012 National Endowment for Financial Education | Lesson 4-4 Investment Strategy32

34. Wealthy Habits 6. Be the one who controls your money. 7. Avoid unnecessary fees. 8. Believe in yourself. 9. Make strategic risks. 10. Be generous. ©2012 National Endowment for Financial Education | Lesson 4-4 Investment Strategy33

35. The Oracle of Omaha Famous Investor, Warren Buffet’s investment philosophy: Invest in top quality, profitable companies with products you understand, good managers, and lots of cash to reinvest in the company… and hold them forever. ©2012 National Endowment for Financial Education | Lesson 4-4 Investment Strategy34

36. 7 Paths to Pure Trouble ©2012 National Endowment for Financial Education | Lesson 4-4 Investment Strategy35 Trusting others blindly Falling for fairy tales Relying on past performance Borrowing to invest Holding only one investment Flipping stocks Getting emotional about investments

37. Start Now!! WHATEVER METHOD YOU CHOOSE THE EARLIER YOU START THE MORE SUCCESS YOU WILL ATTAIN.

38. WHY?????

39. Time is Money