Saving and Investing

Using a compound calculator, calculate the interest you would earn on a $5000 CD with a 1% interest rate a 2 year term. Interest is compounded daily.

$101.01

You purchase 50 shares of stock for 10.00 per share and sell all of the shares 15 years later for 20.00 per share. What was the return on this investment?

$500

Bond

A form of lending to a company or the government (city, state, or federal). The borrower promises to repay the loan in the future plus interest. The amount of interest increases if the lender is taking a risk in making the loan.

401k

A form of retirement fund that an employee contributes to directly through a deduction from their paycheck. Sometimes the employer will match a portion of the contribution.

Checking Account

A payment method to manage your money efficiently. It generally pays no interest in its basic form but does offer a convenient way to purchase things through paper check and debit card.

Mutual Fund

A pool of money from many investors that is used to buy different stocks and bonds. It is professionally managed and spreads the money across a variety of investments.

Savings Account

A safe, low-return investment available from banks. There is generally no minimum deposit for this type of account, making it perfect for kids and teens just starting out.

Certificate of Deposit

A savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return.

Money Market Account

A type of savings account that pays a higher interest rate because the financial institution invests the money you deposit. There is typically a minimum balance required.

Assets

Anything an individual or business owns that has commercial or exchange value

Wealth Creating Assets

Assets that increase in value over time

Saving/Investment option that is safer than buying stocks and provides a higher return than basic savings options

Bonds

Diversification

Buying several different investment alternatives to spread the risk of investing. Not putting your eggs in just one but many baskets.

Stock

Certificate of ownership in a corporation

Highest risk investment option, with a potential for very high returns

Collectibles

Investing

Committing money in the hope that it will make more money over time.

Which compounding frequency will earn you the most money?

Daily

How do you lower risks when investing=

Diversification - spread your money out over different investments

When saving & investing are you earning or paying interest?

Earning

The Magic of Compounding

Earning interest on interest. Why it's so important to start saving as soon as possible.

True or False - Income is an asset

False (it's about what you do with the money)

Simple Interest Formula

I = PxRxT (Interest = Principal X Rate X Time)

Liabilties

Money that is owed

When is the best time to start investing

NOW, the sooner the better

Reasons why you should save in bank instead of keeping money in a jar at home

Safety, Interest, less likely to spend, ease of access when needed, online tracking

Differences in saving vs. investing

Saving is short term, investing long term Saving provides low returns, investing can provide higher returns Saving is low risk, investing can be risky Savings are usually easily accessible, it can be harder to get your money out of an investment

Savings options that are very safe and provide very small returns (Low Risk, Low Return)

Savings Account, Money Market, Certificate of Deposit

Savings

Setting money aside so it can be used for something later

Types of Investments

Stock, Real Estate, Business, Mutual Funds, Bonds, Collectibles

Investment options that can have high risk, but also can provide higher returns (you can make money or lose money)

Stocks, Mutual Funds

Net Worth

The difference between assets and liabilities (Assets - Liabilities = Net Worth)

The basic rule of a risk-to-return relationship

The higher the risk, the higher the potential return rate

Depreciation

The loss of value of an asset over time

Why does a company issue stock

To raise money to help grow their company

Balance Sheet

a financial statement showing a snapshot of assets, liabilities and the net worth of an individual