1. Financial Literacy Session 3

2. What is an investment? Investopedia defines investment as follows: “An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.” What are some investments you can think of?

3. Why invest? -Long Term Savings -Have your money work for you -Financial Security -Don't have to work your whole life -Grow the whole economy

4. Investing is not a 'get rich quick' scheme but is an example of delayed gratification. Investing is not a 'get rich quick, scheme. Investing takes time to generate rewards. It is an example of delayed gratification. Delayed gratification is turning down a small reward for a larger reward in the future. Example: http://www.ted.com/talks/joachim_de_posada_says_don_t_eat_the_marsh mallow_yet

5. Compound Interest “Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it.” ― Albert Einstein Investopedia defines compound interest as the following: “Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.” Example: https://www.investor.gov/tools/calculators/compound-interest- calculator#.UyHUMz9dVn8

6. How to start? Savings for retirement one of the best ways to start. The most common options are 401(k)s & IRAs.

7. 401 (k)'s These are plans established by your employers that can make pay roll deductions into, and are often matched by your employers up to a certain amount. If your employer offers such a plan, particularly with a matching plan, it is advised to participate.

8. IRA's IRA's (Individual Retirement Accounts) are an option if your employer dose not offer a 401 (k) plan, or if you wish to have additional savings. IRA's come in to basic forms, Traditional and Roth IRA's. They have differences in tax deductions, eligibility age, income, maximum contributions, etc...

9. Traditional IRA's The main difference of a Traditional IRA is that contributions are tax deductible However, when you make a withdraw, you will have to pay income tax then. In addition, you must take minimum distributions (withdraws from your account) when you are 70 ½. For Specifics: http://www.us.hsbc.com/1/2/home/invest- retire/retirement/ira

10. Roth IRAs The main difference of a Roth IRA is that while there are no options for tax deductions on contributions, withdraws are tax free. There is also no mandatory age for taking distributions (withdraws) There are other differences between the two types, and additional research is advised to find the plan best suited for your needs.

11. The Stock Market: An overview A share of stock is part ownership in a corporation Owning a share of stock represents a claim on part of a corporations assets and earnings. For example, if a corporation has 10,000 shares of stock, and you own 100 shares, you would own 1% of that corporation. Owning stock often gives the right to vote in the corporation, and receive dividends. Dividends are a percentage of the corporations profits, split between the share holders (those who own stock) While the details and specifics are often more complicated, this is a basic overview of what stocks are.

12. Investing is not 'playing the market' It is called speculation when people make risky 'investments' for short term profits, with little value added. Investing is a long term goal, minimizing risk, and making informed decisions. Historically the market rises, overcoming temporary loses. Randomly picking a set of stocks to see if they go up is not investing. It is not even speculation, it is gambling. Not a good idea.

14. Don't get in over your head I'm not an economist, you're not an economist We shouldn't try to act like one. We can take our time and make informed decisions, but only to a point. A way to avoid getting in over your head, but still participating in the market is to work with an investment management company.

15. Investment Management Companies Not being professionals, it is possible to have professionals manage your investments for you. Until recently these services were only available to people who had significant amounts of extra money to invest. But today, the initial funding requirements for many accounts are within the grasp of everyday individuals. These companies will often have different funds a person could invest in. They are diversified between different stocks and bonds, and are organized by predicted return and risk.

16. Investment Management Companies: Online Examples Wells Fargo: http://www.wellsfargoadvantagefunds.com/wfweb/wf/funds/index.jsp?BV_UseBV Cookie=yes&sel=%2fDTF%2fFunds Vanguard: https://investor.vanguard.com/mutual-funds/vanguard-fund-options These are just two examples. There is a wide variety of options to chose from when deciding to invest your money.

17. Investment Management Companies: Local Examples Steve Bebee 125 Third Ave. Havre, MT 59501 (406) 265-5574 Thomas Tilleman 1465 Hwy. 2 NW Suite C Havre, MT 59501 (406) 265-9995 Patricia Matthew 536 Lincoln Ave PO Box 1225 Big Sandy, MT 59520 (406) 378-2110

18. Questions?