Saving

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Saving Investing
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Learning Goal

• To be able to compare the different ways of
  saving or investing money.

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Why Save Money???

• Major Purchases
• Cars, stereo systems, guitars, college
• Emergencies
• Car breaks down, medical problem, losing your job
• Retirement
• How long do you want to work???

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Savings Account

• An Account where money is easily accessible, and
  earns interest.

• Advantages
• Low minimum deposit
• Can be accessed at any time
• Very low-risk

• Disadvantages
• Low Interest Rate
• Possible Bank Fees
• Will take longer to earn more money

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Certificate of Deposit (CD)
A savings account alternative where money is left
for a specific length of time in order to earn a
higher interest rate.

• Disadvantages
• At least 500 minimum deposit
• Cant access money for at least 6 months

• Advantages
• Higher Interest Rate
• Short Period of Time
• Low Risk

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Savings Bonds
A written promise from the government or a
Corporation to repay a loan with interest on a
specific date.

• Advantages
• Money will double
• If left longer, money will more than double
• Extremely low-risk

• Disadvantages
• Very Long-Term
• Not as effective as some interest rates.
• If cashed-in early, you have to pay a penalty

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Mutual Funds

• An investment in many stocks, bonds and
  securities selected by professional investment
  companies

• Advantages
• Proven to earn higher rates of interest over long
  periods of time
• Diversification not all of your eggs in one
  basket

• Disadvantages
• Money must be left for long periods of time
• Investments fluctuate
• Not easily accessible

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Stock

• An investment granting ownership of a company.

• Advantages
• Potential to earn large sums of money
• Can earn dividends amounts paid to owners when
  company does well

• Disadvantages
• Extremely risky
• Costs incurred for every transaction
• Potential for extreme fluctuations

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Real Estate

• Land and any structures on it that a person owns.

• Advantages
• Dual purpose you can live in/on your investment
• Potential to earn large sums of money

• Disadvantages
• Need to go into debt in order to earn money
• May take many years
• Realtor fees
• No guarantee of profit

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Gold, Silver Precious Gems

• Advantages
• Mostly a stable investment, over long periods of
  time
• Very low risk

• Disadvantages
• Fluctuates rapidly with world events
• World events more unstable value rises
• World events more stable value falls

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Collectibles

• Baseball Cards, Coins, Antiques, Stamps, Comic
  Books, Rare Objects

• Advantages
• Potential for very high profit
• EBay and the Internet make this investment easier

• Disadvantages
• Value fluctuates greatly depending on peoples
  perception and the condition of items
• Extremely risky investment

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Learning Goal

• To be able to compare the different ways of
  saving or investing money.

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Risk Investments
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Learning Goal

• To be able to analyze the risk of an investment.

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Five Components of Risk

• Inflation
• The consistent rise in prices of goods and
  services over time
• Example McDonalds hamburger in 1967 costs 10
  cents, now it costs about a dollar
• Why?

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Inflation

• If your rate of return is less than the inflation
  rate, you are actually losing the value of your
  investment EVEN IF YOU HAVE MORE MONEY!

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Five Components of Risk

• Interest Rate
• If the Federal Reserve adjusts interest rates,
  you might be locked into a higher or lower
  interest rate than what is currently available
• Adjustable Rate changes with the Federal rates.
• Fixed Rate stays the same throughout the loan
  or investment.

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Five Components of Risk

• Business Failure
• Investments in companies that go bankrupt are
  lost!
• This can be minimized depending on the company.
• Financial Market
• The publics perception of the economy and
  various financial markets

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Five Components of Risk

• Global Events
• When events around the world effect the value of
  certain investments
• Example After 9/11, which investments lost
  value? Which gained value?

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Learning Goal

• To be able to analyze the risk of an investment.