1. CHAPTER 6 SAVING AND INVESTING

2. LEARNING OBJECTIVE I understand how the entire community benefits when I put money in a savings account

3. LEARNING OBJECTIVE I can identify advantages and disadvantages of savings and time deposit accounts

4. DECIDING TO SAVE Benefits of Saving: (3-12 mths of income) – Allows business expansion Increases Income for Others – Allows Higher Standard of Living – Earn on savings Savings Trade-offs: – Immediate Access = – Higher Interest =

5. SAVINGS ACCOUNTS AND TIME DEPOSITS Savings Account – Immediate withdrawal – no penalty Money Market Deposit Account – Only allowed certain # of withdrawals a month

6. TIME DEPOSITS Requires deposits to remain for certain period of Most Common is a CD (Certificate of Deposit) – States amount deposited, Length time till maturity, Rate of interest being paid Advantages: – Pays higher interest than savings account Disadvantages:

7. INSURING DEPOSITS 1929 Stock Market Collapse New Deal – Signed by Franklin Roosevelt Created Federal Deposit Insurance Corporation (FDIC) – Protects: – Protection up to – Protects some special retirement accounts National Credit Union Association (NCUA)

8. LEARNING OBJECTIVE I can identify advantages and disadvantages of savings and time deposit accounts

9. LEARNING OBJECTIVE I understand how investing in stocks and bonds as a retirement option would be beneficial

10. INVESTING: TAKING RISKS WITH YOUR SAVINGS STOCKS AND BONDS Corporations sell stock Use for Expansion Stock Returns Stockholders (ownership) 2 benefits: Capital Gains and Losses Capital Gain – Capital Loss –

11. BONDS Receipt from business or government for Promise to repay borrowed funds with interest over stated period of time NO

12. DIFFERENCES IN STOCKS AND BONDS STOCKS Issued by ALL Corporations Represent Ownership No fixed dividend rate Dividends only paid if profits No maturity date Stockholders elect BoD which controls corporation Stockholders only have claim after all creditors have been paid BONDS Corporations not required to issue bonds. Bonds represent debt Bonds pay fixed rate of interest Interest must always be paid, whether profits or not Have a maturity date for repayment No voice or control in running of corporation Have claim against property and income of a corporations BEFORE stockholders

13. TYPES OF BONDS Tax-Exempt Bonds Earnings Not Taxed by Gov’t (fed, state, or local) Investment for wealthier Savings Bonds Very Safe, Not taxed until cashed T-Bills, T-Notes, T-Bonds Sold by Treasury Department Interest is Tax Exempt from State and Local BUT NOT Federal Government Mature few days to 26 weeks Minimum Investment $1,000 Maturity dates 2 to 10 years Matures in 30 years

14. STOCK MARKETS Broker – Charges a fee based on $ amount traded Online Trading available as well Stock Exchanges Also regional and among many countries Companies are largest most profitable in world Over the Counter Markets Stocks not listed on organized exchanges National Association of Securities Dealers Automated Quotations (NASDAQ) – largest Usually sold in amounts of 100 shares Stock Market Indexes Indicator used to determine what happened to stocks on market 30 major industrial companies in the United States Tracks stock prices of 500 companies

15. BOND MARKETS New York Exchange Bond Market and American Exchange Bond Market (2 largest) Sold Over-the-Counter and Online Mutual Funds Pulls money from many investors Diversified Managed Individual constantly views and switches investments Collects Fee Mutual Funds are NOT Insured by the Federal Government

16. GOVERNMENT REGULATIONS ON STOCKS, BONDS, MUTUAL FUNDS Securities and Exchange Act of 1934 Sets up the Attempt to avoid another Stock Market Crash

17. LEARNING OBJECTIVE I understand how investing in stocks and bonds as a retirement option would be beneficial

18. LEARNING OBJECTIVE I can identify other retirement opportunities I can take part in to be able to retire comfortably

19. INVESTING FOR RETIREMENT Social Security Act (1935) Designed to get elderly to retire and open up jobs for unemployed during the Great Depression Today, only a Encouraged to have separate retirement plan

20. INDIVIDUAL RETIREMENT PLANS Pension Plan (Done through your Employer) 401(k) Portion of check withheld Matched by Employer 403(B) – Employer CANNOT match contributions Keogh Plan Keogh Act of 1962 Max 15% of Income a year MyRA IRA (Traditional) Contribute up to $4,000 a year Contributions and Interest Earned not taxed until Withdrawal (after 59 ½) Roth IRA Contribute up to $4,000 a year Interest earned is tax-free forever if taken out after 59 ½ No taxes when money gets withdrawn

21. REAL ESTATE INVESTMENT Advantages: Values tend to increase over time Up 700% since 1980 Disadvantages: No guarantee for demand in future (especially on raw land) Cannot turn into cash fast

22. LEARNING OBJECTIVE I can identify other retirement opportunities I can take part in to be able to retire comfortably

23. LEARNING OBJECTIVE I can identify the benefits and trade-offs of investing in a retirement account or saving money

24. HOW MUCH TO SAVE AND INVEST? Trade-Offs HOWEVER – Other high interest debt? Pay it off first

25. OTHER CONSIDERATIONS Amount of Risk Higher Risk = Liquidity Spreading Out Your Investments Little Income – Greater Income – Values Community needs more development – Savings Bank Companies that promote the same values and ideas as you? Environmental Protection Companies? Charitable Companies?

26. LEARNING OBJECTIVE I can identify the benefits and trade-offs of investing in a retirement account or saving money