1. Splash Screen

2. Chapter Menu Chapter Introduction Section 1:Section 1:Why Save? Section 2:Section 2:Investing: Taking Risks With Your Savings Section 3:Section 3:Special Savings Plans and Goals Visual Summary 2

3. Chapter Intro 1 Governments and institutions help participants in a market economy accomplish their financial goals. 3

4. Chapter Intro 2 In this chapter, read to learn about reasons for saving, as well as various investment possibilities and the risks associated with them. 4

5. Chapter Preview-End

6. Section 1-Main Idea Section Preview In this section, you will learn about the benefits of saving and the types of savings accounts available to you.

7. Section 1-Key Terms saving savings account money market deposit account time deposits maturity certificates of deposit Content Vocabulary

8. Section 1-Key Terms require minimum Academic Vocabulary

9. A.A B.B C.C Section 1-Polling Question How important is saving money to you? A.Extremely important B.Fairly important C.Not important

10. Section 1 Deciding to Save Savings consist of income set aside for future use.

11. Section 1 Deciding to Save (cont.) Economists define savings as the setting aside of income for a period of time so that it can be used later.savings –A person receives interest on a savings plan for as long as the funds are in the account.

12. Section 1 Deciding to Save (cont.) Saving benefits the economy as a whole: –It provides funds for others to invest or spend. –It allows businesses to expand, which provides increased income for consumers and raises the standard of living.

13. Section 1 Deciding to Save (cont.) Some savings plans allow immediate access to your funds but pay a low rate of interest. Others pay higher interest and allow immediate use of your funds, but require a large minimum balance.

14. A.A B.B C.C D.D Section 1 All of the following are places to put your savings EXCEPT: A.A commercial bank B.A savings and loan association C.A credit union D.A mortgage

15. Section 1 Savings Accounts and Time Deposits Savings accounts and time deposits offer a variety of maturities and are insured by agencies of the federal government.

16. Section 1 Options for saving: Savings Accounts and Time Deposits (cont.) –A savings account pays interest, has no maturity date, and allows funds to be withdrawn at any time without penalty.savings account –Money market deposit account (MMDA) pays relatively high rates of interest, requires a minimum balance of $1,000 to $2,500, and allows immediate access to funds.Money market deposit account View: Savings BasicsSavings Basics

17. Section 1 –Time deposits require savers to leave their funds on deposit for certain periods of time, or maturity.Time depositsmaturity Savings Accounts and Time Deposits (cont.) –Time deposits are often called certificates of deposit (CDs), or savings certificates. certificates of deposit View: Savings ChoicesSavings Choices

18. Section 1 After the stock market crash of 1929, the Federal Deposit Insurance Corporation (FDIC) was created to protect peoples’ funds. Savings Accounts and Time Deposits (cont.) –The National Credit Union Association (NCUA) is another federal agency that insures most banks and savings institutions.

19. A.A B.B Section 1 Which type of account will pay you more in the long run? A.A regular savings account B.A CD

20. Section 1-End

21. Section 2-Main Idea Section Preview In this section, you will learn about different types of investments and the risks that they carry. 21

22. Section 2-Key Terms stockholders capital gain capital loss tax-exempt bonds savings bonds Treasury bills Treasury notes Treasury bonds broker over-the-counter marketover-the-counter market stock market indexes mutual fund money market fund Content Vocabulary 22

23. Section 2-Objectives design scheme Academic Vocabulary 23

24. A.A B.B Section 2-Polling Question Would you keep your savings in a bank or would you buy stocks? A.Bank B.Stock 24

25. Section 2 Stocks and Bonds Stockholders are owners of a corporation, and bondholders are creditors of a corporation. 25

26. Section 2 Stocks and Bonds (cont.) Corporations are formed or can expand business by selling shares of stock. –The person who buys this stock, becomes a stockholder, and is entitled to part of the future profits and assets of the corporation.stockholder 26

27. Section 2 Stocks and Bonds (cont.) Stockholders benefit from stock in two ways: –Earn dividends or a return based on the amount of stock invested. –Can sell stock for more than they paid for it. 27

28. Section 2 Stocks and Bonds (cont.) Profits made on the sale of stock is referred to as a capital gain.capital gain A decrease in value on the sale of the stock is referred to as a capital loss.capital loss 28

29. Section 2 Stocks and Bonds (cont.) Similar to stock, a bond is a certificate issued by a company or the government in exchange for borrowed funds. –Bonds promise to pay a stated rate of interest over a stated period of time, in addition to repaying the borrowed amount in full at the maturity date. –A bond does not make a bondholder part owner of the company. 29

30. Section 2 Stocks and Bonds (cont.) Tax-exempt bonds are sold by local and state governments: interest paid on the bond is not taxed by the federal government.Tax-exempt bonds –Interest that you earn on bonds your own city or state issues is also exempt from city and state income taxes. View: Differences Between Stocks and BondsDifferences Between Stocks and Bonds 30

31. Section 2 Stocks and Bonds (cont.) Savings bonds are issued by the federal government as a way of borrowing money.Savings bonds –These are safe. –Interest earned is not taxed until the bond is turned in for cash. 31

32. Section 2 Stocks and Bonds (cont.) The Treasury Department of the US Government sells several types of larger investments. They include: –Treasury bills (T-bills)Treasury bills –Treasury notes (T-notes)Treasury notes –Treasury bonds (T-bonds)Treasury bonds 32

33. A.A B.B Section 2 Is the following description of a stock or a bond? These represent ownership, do not have a fixed dividend rate, and do not have a maturity date. A.Stock B.Bond 33

34. Section 2 Stock and Bond Markets Ownership of stocks and bonds can be transferred on centralized exchanges or in decentralized markets. 34

35. Section 2 Stock and Bond Markets (cont.) Stocks are bought and sold through brokers or through Internet brokerage firms. brokers Brokerage houses communicate with the busy floors of the stock exchanges. –The largest stock exchange, or stock market, is the New York Stock Exchange (NYSE). Others include the Chicago Exchange, London Exchange and Tokyo Exchange. 35

36. Section 2 Stock and Bond Markets (cont.) Stocks can also be sold on the over-the- counter market, an electronic marketplace.over-the- counter market The largest volume of these smaller company stocks are quoted on the National Association of Securities Dealers Automated Quotations (NASDAQ) national market system. 36

37. Section 2 Stock and Bond Markets (cont.) Nearly every weekday, news is given about the activity to the stock market indexes.stock market indexes –Dow Jones Industrial Average or “The Dow” is the most well-known index. The New York Exchange Bond Market and the American Exchange Bond Market are the two largest bond exchanges. 37

38. Section 2 Stock and Bond Markets (cont.) Many people invest in the stock market by placing savings in a mutual fund.mutual fund –The long-run return from index funds is higher than can be expected from almost any other investment. –A managed mutual fund is one in which the managers adjust the mix of stocks and move in and out of the market to try to generate the highest total return. 38

39. Section 2 Stock and Bond Markets (cont.) Money market fund is one type of mutual fund.Money market fund –The investor can write checks (above some minimum amount) against their account. 39

40. Section 2 Stock and Bond Markets (cont.) Banks and savings and loan associations offer money market deposit accounts (MMDA). The advantage to MMDAs is that the federal government insures them against loss. 40

41. A.A B.B C.C D.D Section 2 If you had to choose how to invest your money, which one of these would you pick? A.Stocks B.Bonds C.Mutual fund D.Money market fund 41

42. Section 2 Government Regulations Securities markets are heavily regulated to protect investors. 42

43. Section 2 Government Regulations (cont.) The Securities and Exchange Commission (SEC) is responsible for administering all federal securities laws. It also investigates any dealings among corporations. 43

44. Section 2 Government Regulations (cont.) Congress passed the Securities and Exchange Act after the stock market crash of 1929. The SEC requires any institution issuing stocks or bonds: –To file a registration statement with the federal government –Give a prospectus (brief description) to each potential buyer of stocks or bonds 44

45. Section 2 Government Regulations (cont.) States also have securities laws which protect small investors. 45

46. VS 2 After you have accumulated savings funds, you may want to invest some of it to try to earn greater returns. 46

47. Section 2-End

48. Section 3-Main Idea Section Preview In this section, you will learn about special types of investment plans and how to decide what portion of your income to save and invest. 48

49. Section 3-Key Terms pension plans Keogh plan individual retirement account (IRA) Roth IRA diversification Content Vocabulary 49

50. Section 3-Objectives portion contribute overall Academic Vocabulary 50

51. A.A B.B C.C D.D Section 3-Polling Question What do you think would be most important to save for? A.A house B.Your child’s college fund C.Retirement D.Travel, shopping, cars (fun things) 51

52. Section 3 Investing for Retirement Retirement is a major reason for saving and investing. 52

53. Section 3 Investing for Retirement (cont.) It is important for a person to save for and invest in his or her own retirement. Retirement savings plans can include: –A pension plan is a company supported plan like a 401(k) that is not taxed until used.pension plan –A Keogh plan is a retirement plan for self-employed individuals.Keogh plan 53

54. Section 3 Investing for Retirement (cont.) –An individual retirement account (IRA) is a private retirement plan for individuals.individual retirement account Contributions are deductible from taxable income. Taxed when taken out. 54

55. Section 3 Investing for Retirement (cont.) –A Roth IRA is a private plan for individuals.Roth IRA Taxes income before it is saved. Does not tax interest on that income when funds are used upon retirement. View: Retirement Plan OptionsRetirement Plan Options 55

56. Section 3 Investing for Retirement (cont.) Buying real estate, such as land and buildings, is another form of long term investing. 56

57. A.A B.B C.C D.D Section 3 Which type of plan would you feel most comfortable with? A.401(k) B.Keogh C.IRA D.Roth IRA 57

58. Section 3 How Much to Save and Invest? How much to save and invest is determined by each individual’s income, risk tolerance, and values. 58

59. Section 3 How Much to Save and Invest? (cont.) The higher the promised return on an investment, the greater the risk. View: Savings ConsiderationsSavings Considerations 59

60. Section 3 How Much to Save and Invest? (cont.) When you have very little income, you should probably put your savings into lower risk accounts. It is important to practice diversification to lower your overall risk.diversification View: Risk and ReturnRisk and Return 60

61. Section 3 How Much to Save and Invest? (cont.) Your values may also determine where you invest your savings. You might want to invest locally, choose to invest in environmentally responsible companies or choose to invest in companies that have aggressive equal opportunity programs. 61

62. A.A B.B C.C D.D Section 3 In general, what three things determine how you should save? A.Time, income, and job. B.Income, job, and inheritance. C.Income, risk tolerance, and values. D.Values, risk tolerance, and time. 62

63. Section 5-End

64. VS 1 Saving some of your income allows you to earn interest and put away funds for future purchases. 64

65. VS 3 It is important to diversify your saving and investing, especially when looking toward retirement. In general, the greater the risk involved in any venture, the greater the potential return. 65

66. VS-End

67. Figure 1 67

68. Figure 2 68

69. Figure 3 69

70. Figure 4 70

71. Figure 5 71

72. Figure 6 72

73. DFS Trans 1 73

74. DFS Trans 2 74

75. DFS Trans 3 75

76. Vocab1 saving: setting aside income for a period of time so that it can be used later 76

77. Vocab2 savings account: account that pays interest, has no maturity date, and from which funds can be withdrawn at any time without penalty 77

78. Vocab3 money market deposit account: account that pays relatively high rates of interest, requires a minimum balance, and allows immediate access to funds 78

79. Vocab4 time deposits: savings plans that require savers to leave their funds on deposit for certain periods of time 79

80. Vocab5 maturity: period of time at the end of which time deposits will pay a stated rate of interest 80

81. Vocab6 certificates of deposit: time deposits that state the amount of the deposit, maturity, and rate of interest being paid 81

82. Vocab7 stockholders: people who have invested in a corporation and own some of its shares of stock 82

83. Vocab8 capital gain: increase in value of an asset from the time it was bought to the time it was sold 83

84. Vocab9 capital loss: decrease in value of an asset from the time it was bought to the time it was sold 84

85. Vocab10 tax-exempt bonds: bonds sold by local and state governments; interest paid on the bond is not taxed by the federal government 85

86. Vocab11 savings bonds: bonds issued by the federal government as a way of borrowing money; they are purchased at half the face value and increase every 6 months until full face value is reached 86

87. Vocab12 Treasury bills: certificates issued by the U.S. Treasury in exchange for a minimum amount of $1,000 and maturing in a few days up to 26 weeks 87

88. Vocab13 Treasury notes: certificates issued by the U.S. Treasury in exchange for minimum amounts of $1,000 and maturing in 2 to 10 years 88

89. Vocab14 Treasury bonds: certificates issued by the U.S. Treasury in exchange for minimum amounts of $1,000 and maturing in 30 years 89

90. Vocab15 broker: person who acts as a go-between for buyers and sellers of stocks and bonds 90

91. Vocab16 over-the-counter market: electronic purchase and sale of stocks and bonds, often of smaller companies, which often takes place outside the organized stock exchanges 91

92. Vocab17 stock market indexes: measures of what is happening to a given set of stock prices for a specified list of companies; the most well known is the Dow Jones Industrial Average 92

93. Vocab18 mutual fund: investment company that pools the funds of many individuals to buy stocks, bonds, or other investments 93

94. Vocab19 money market fund: type of mutual fund that uses investors’ funds to make short-term loans to businesses and banks 94

95. Vocab20 pension plans: company plans that provide retirement income for their workers 95

96. Vocab21 Keogh plan: retirement plan that allows self-employed individuals to save a maximum of 15 percent of their income up to a specified amount each year, and to deduct that amount from their yearly taxable income 96

97. Vocab22 individual retirement account (IRA): private retirement plan that allows individuals or married couples to save a certain amount of untaxed earnings per year with the interest being tax- deferred 97

98. Vocab23 Roth IRA: private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement 98

99. Vocab24 diversification: spreading of investments among several different types to lower overall risk 99

100. Help Click the Forward button to go to the next slide. Click the Previous button to return to the previous slide. Click the Home button to return to the Chapter Menu. Click the Transparency button from the Chapter Menu or Chapter Introduction slides to access the Economic Concepts Transparencies that are relevant to this chapter. From within a section, click on this button to access the relevant Daily Focus Skills Transparency. Click the Return button in a feature to return to the main presentation. Click the Economics Online button to access online textbook features. Click the Reference Atlas button to access the Interactive Reference Atlas. Click the Exit button or press the Escape key [Esc] to end the chapter slide show. Click the Help button to access this screen. Links to Presentation Plus! features such as Graphs in Motion, Charts in Motion, and relevant figures from your textbook are located at the bottom of relevant screens. To use this Presentation Plus! product: 100

101. End of Custom Shows This slide is intentionally blank.