1. Saving and Investing Why Save? And How?

2. Teacher/Parent Interview Do you have a written budget? What strategies do you use to allocate your financial capital(money)? Do you have a plan to save money? What are the biggest obstacles to saving money? Do you have any investment accounts? Give one example of an investment account that you use.

3. Key Vocabulary Disposable Income Discretionary Income Fixed Expenses Variable Expenses Tradeoffs Opportunity Cost Budget

4. Why? Large Annual or Semi-annual Payments Examples: Car insurance Property Taxes Vacation / Christmas

5. Why? Unexpected Expenses Examples: Speeding ticket Car trouble Home repairs

6. Why? Major Purchases Examples: Car Furniture / Appliances Engagement Ring Down Payments

7. Why? Future Expenses Examples: Children College Retirement Funeral

8. Why? To accumulate wealth

9. How? 1. Savings Account Low interest High Liquidity FDIC protected Emergency Fund Life Change Fund

10. How? 2. Money Market Little more return (yield) than SA Less liquid –Limits on withdraws –Minimum balances Can write checks

11. How? 3. Time Deposits Examples: CD, Savings Bonds, Gov’t Securities Time requirements called maturity dates Longer the maturity date or higher the minimum balances the higher the yield.

12. Savings Bonds Pay less than face value now - collect face value at maturity. Rule of 72 Example: $50 savings bond that pays 4%. 72/4 = 18 (reaches maturity in 18 yrs).

13. Government Securities T-Bills - short-term (3m - 1 yr) high minimum. T-Notes (1 - 10 yrs) $1000 - $10,000 T-Bonds (10+ years) $1000 increments.

14. How? 4. Corporate Bonds Little to a lot more risk. You are basically a lender to the corporation. Bond Ratings - AAA, AA, A, BBB, etc Junk Bonds - extreme risk, basically worthless.

15. Bond Listing

16. How? 5. Mutual Funds Investment into Company Stocks Diversification Way to invest without putting all your eggs in one basket. Less control over who you are investing in, but still have control over what type investing you do.

17. Mutual Fund A mutual fund is a professionally managed investment that pools money from many investors and invests in stocks, bonds, & other mutual funds. The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective.

18. Answers to FE - 17 1075109091,92,93 1153106890, 94-99 12421100safer, better short term 13351276long-term better return 14351506 15431807 16592150 17832774 19173162 20614396

19. How? 6. Stocks Ownership in a company Buy low sell high Dividends Broker - go between for buyers and sellers in the market.

20. Exchanges NYSE NASDAQ AMEX Regional Exchanges World Exchanges

21. Index Gives you an idea on how the whole market is doing. Examples: Dow Jones Industrial Average S&P 500 (100)(50) Internet 50 Bull and Bear

22. Investment Game Google – NYSE, Small Cap Companies Pick 3, write down stock symbol Open New Window www.yahoo.com Go to Finance Enter Stock Symbol Write down current Price Go to Historical Prices

23. Common stocks 10%-13% Stocks of smaller companies 14%-16% Long term corporate bonds 6.5%-8% Long term US government bonds 5%-7.5% Short term US Treasury bills 3.5%-5%

24. Commodities Agricultural Products (Pork Bellies, soybeans) Precious Metals (Gold, silver)

25. Other Investments Real Estate Annuities / Pension Plans –401k –403b –IRA (Roth IRA) Tax Free –Keogh Plans College Plans –529 Plan Small Business

26. Saving vs Investing Saving - putting money aside for future expenses Investing - putting money aside for the purpose of making money

27. Capital Gains/Losses Capital Gains - tax on money made through investments. Capital Losses - deduction on taxes

28. Where to invest? 1. You have $5000 to invest. No other information is available. 2. You have $4000 that you will need six months from now 3. You inherited $10000 from a great- aunt; she has suggested that you save it for use in your old age.

29. Where to invest? 4. You are just starting a career and can save $50 per month for retirement. 5. A new baby arrives, and mom and dad plan to save $100 a month for the child’s college education.

30. Quiz Which has more liquidity? CD or Money Market Which has more liquidity? Savings Account or Checking Which has more liquidity? T-bill or T-Bond

31. Quiz What is the relationship between liquidity and rate of return? Which has more risk? Mutual Fund or Stocks Which has more risk? AAA Bond or AA Bond

32. Quiz Which has more risk? Junk Bond or Mutual Fund What is the relationship between risk and rate of return? What plan would someone who is self- employed use to defer taxes? What type of IRA is Tax free?

33. Which is harder to get? Secure loan or Unsecured loan? Why? Collateral

34. Goods that last 3 or more years? Durable Opposite of durable goods? Consumption or perishable goods

35. The “T” in T-Bills stands for: Treasury

36. How do Savings Bonds pay their interest? Pay less than face value, then when bond matures, you get face value.

37. Pension plan for self employed? Keough plan

38. Spreading out investments to lessen risk? Diversification

39. Finance company that specializes in home loans? Mortgage Company

40. Which should come first? Saving or Investing

41. Cost of credit expressed in dollars and cents? APR or Finance charge

42. Financial institution that is member owned? Commercial bank or Credit Union

43. Credit cards are issued by? Banks or Credit card companies Is a debit card the same as a credit card?

44. What happens to the monthly payment when you decrease the length of loan? Increases Total of payments? Decreases

45. A Roth IRA is? Tax deferred or Tax free

46. Which has more risk? Mutual fund or Bond Lender? Bond Owner? Stock

47. The Dow Jones is a? Stock Index or Stock Exchange

48. Largest exchange? NYSE Name another exchange. NASDAQ or AMEX

49. Payment from company to shareholders? Dividend IF you make money on an investment it is called? Capital Gain

50. Advantages of retirement plans Tax deferred Tax free Other names for retirement plans? IRA Annuity Pension plan 401K, 403B, Keough plan

51. Which would be higher? Interest earned or Interest paid