Saving and investing tools
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Saving and Investing Tools. Carl Johnson Financial Literacy Jenks High School. Terms to Know. Certificate of Deposit Corporate Bonds Money Market Mutual Funds Mutual Fund Rate of Return Risk Savings Account Savings Bonds Stocks . Savings Strategies.

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Saving and investing tools

Saving and Investing Tools

Carl Johnson

Financial Literacy

Jenks High School


Terms to know

Terms to Know

Certificate of Deposit

Corporate Bonds

Money Market Mutual Funds

Mutual Fund

Rate of Return

Risk

Savings Account

Savings Bonds

Stocks


Savings strategies

Savings Strategies

Your goals will determine the choices that you will want to make when planning your savings and investments

Savings is generally used to meet short and medium term goals of seven years or less, while investing is generally used to meet long term goals

There are several options to consider when planning your savings strategy: savings accounts, certificates of deposit (CD’s), government savings bonds, money market mutual funds and checking accounts


Savings strategies1

Savings Strategies

Savings Accounts

Interest bearing accounts at banks and credit unions

Usually have low interest rates, are used to deposit small amounts of money and meet short term goals

Great way to establish an emergency fund

Make sure bank has FDIC protection/credit union has NCUA insurance


Savings strategies2

Savings Strategies

Certificate of Deposit

Also called CD’s

Offered by most banks and credit unions

  • Covered by federal insurance

    When purchased, you have to wait a certain amount of time until CD matures to get your money

  • Ranges in time from 30 days to many years, depending upon what CD you use

    The longer the term of the CD, the higher the rate of interest

    Less liquid as a savings account, but usually have a higher interest rate than a savings account


Savings strategies3

Savings Strategies

Government Savings Bonds

Backed by the U.S. government, so there is little or no risk

Default risk is the potential that the bond issuer will not pay the interest or return your money when it matures

Many are designed to be held for a minimum number of years before you can cash them in to get your money and interest

Have a higher rate of return due to the length of maturity, but also are low risk which reduces potential earnings


Savings strategies4

Savings Strategies

Money Market Mutual Funds

Designed to provide higher rates of return than savings accounts because money is actually invested in very short term investments with low risk

Available at banks and credit unions, but may be also offered by other financial service providers

  • The ones offered by banks and credit unions are covered by federal insurance, while those offered by other financial service providers are not

    • To cover the additional risk, those tend to pay higher interest rates


Savings strategies5

Savings Strategies

Checking Accounts

Basic purpose is not saving money, but to provide a convenient way to handle personal and business transactions

Many checking accounts earn a very small percentage of interest


Investing strategies

Investing Strategies

When you invest, you are really hoping for a higher rate of return than when you save

Investment options tend to have higher rates of risk than savings options, but also tend to have higher rates of return

As in any investment, there is no guarantee to making money

Most adults tend to focus their investments on retirement benefits

  • It is never too early to consider your strategy for long term goals


Investing strategies1

Investing Strategies

Mutual Funds

Provides an opportunity for investors to pool money together to buy shares of a fund that invests in many different products (stocks, bonds and securities)

Is a great way for people with limited money and knowledge about investing to get started

Mutual funds accounts have a professional money manager who monitors the account closely to make sure that it is earning the maximum amount possible


Investing strategies2

Investing Strategies

Mutual Funds

Various economic factors may cause the rate of return to fluctuate, even lose money

Because it is a long term investment, you generally have an opportunity to recover from any loss

Most financial experts recommend mutual funds because the potential gains are greater than the losses


Investing strategies3

Investing Strategies

Stocks

Buying stocks allow to own part of a company

Don’t just buy stocks in one company, you can diversify your portfolio by buying stocks in more than one company

  • Experts recommend owing at least ten different stocks in different industries

    Buying and selling stocks can be exciting and profitable, but it is more risky and expensive than owning a mutual fund


Investing strategies4

Investing Strategies

Corporate Bonds

When you buy a corporate bond, you are making a loan to the company

You allow them to use your money, and they pay you interest

The interest that you receive is the value of your investment

Buying into bond mutual funds is an alternative for investors because it spreads your risk

It is a lower risk option with lower returns than stocks


Rates of returns

Rates of Returns

Risk levels are different for various savings and investment options

The rate of return is the amount of money that you can earn when saving and investing

The higher the average return, the more risk you are taking as an investor

Average returns do not guarantee what you will earn, they will only show what has happened in the past with that type of investment


Average rates of return

Average Rates of Return

Since 1926


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