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Agenda

This agenda discusses the purpose of saving money, the importance of saving money, types of investments, building credit, retirement investments, and the stock market. Learn how to make smart financial decisions and secure your future.

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Agenda

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  1. Agenda • 1. Warm-Up- Savings Quick Write • 2. Discuss Savings and Investing • 3. Future Debtors

  2. Savings Warm-Up • On a separate piece of paper titled Savings answer the following prompt in 3-5 sentences: • What is the purpose of saving money and why is it important to save money?

  3. Saving and Investing

  4. Introducing Investing • Investment: giving up some of your resources now in order to gain later • Essential part of free market system (Win, Win) • People make money because of interest from putting into savings account • Promotes economic growth of the nation • Bank collects money • Bank loans to business • What do businesses do with loans? • What are consequences if little savings available to banks ?

  5. 3 Factors to Consider When Investing • 1. Rate of Return: How much money will you earn? • Percentage (interest on a savings account) • Dollar amount (investing in a business) • 2. Degree of risk: chance of losing money • Saving account=safe • Stock market= more risky • 3. liquidity: how easy you can convert to cash • Savings account= very liquid • Real estate= not liquid • In general • Low return= low risk, high liquidity • High return= high risk, low liquidity

  6. Building Credit • Get a job! • Save at least 10-12% • Open a savings/checking account • Pay bills on time! • Open a credit card • Dept. store • Gas card • Visa/MasterCard/AMEX • Don’t apply for too many • Don’t pay annual fees • Use the card for small things, and pay it off IN FULL every month for good credit

  7. Mutual Funds • Pools money from hundreds and thousands of investors to construct a portfolio of stocks, bonds, real estate, or other securities • Each investor in the fund gets a slice of the total pie. • A mutual fund provides diversification, spreads risk and provides the convenience of buying and selling shares in the fund on any business day

  8. Treasury Notes, Bonds and Bills • Fed Gov’t issues bonds/bills when borrowing for over a year • Gov’t makes periodic interest payments • Regarded as safest of all financial investments • T-bills have 13, 26 or 52 week maturity • Do not pay interest, sold on discount basis (ex $10,000 T-Bill might sell for $9300)

  9. Warm-Up • 1. What general statements are true about high risk investments? • 2. What is the advantage of buying government bonds?

  10. Bonds • Certificates sold by a company or government to finance projects or expansion • Typically a fixed return for a fixed period of time • Low risk=low return • Vocab • Principle: how much you pay for the bond • Coupon rate: interest on the bond • Maturity: time when payment is due • Issuer: seller of the bond • Holder: investor who buys the bond • Example: • coupon rate= 5% annually • Maturity= 10 years • Principle= $1000 • Owner will receive $50 a year for 10 years

  11. Retirement Investments • Males should invest 10% • Females 12% • Why? • People living longer • Early retirement • 401 (K) • Retirement account through your employer • Automatic, free deduction from your paycheck • Some companies match your contribution • Put into an investment fund to make interest • Collect at age 59.5

  12. 10 Rules of Investing • 1. Start early • Time=money • Compound interest • Time to ride out the low times • 2. Diversify • Invest in many different stocks, bonds, and real estate • High, medium, and low risk • 3. Keep costs low • Don’t pay too much commission when you invest • 4. INVEST IN YOURSELF • Train/educate to get more $$$ • Real estate

  13. 10 Rules of Investing Cont. • 5. Get help! • Talk to a financial advisor • 6. Be Patient • Reduce risk to buy and sell quickly • 7. Stay out of debt • Real estate and student loans okay • 8. Let your profits run • Long term investments make more $$$ • 9. Set a goal • 10. Remain honest

  14. The Stock Market

  15. The Stock Market • “Nothing has created more millionaires in this country.” • Besides bonds, corporations can raise $$$ by selling stocks • Stocks are issued in portions called shares, the owner is called shareholder • Shares represent partial ownership in a company • Stocks also called equities

  16. 2 Ways to Make Money in Stocks • 1. Capital Gains: buy a stock for a low price and sell it when it goes up • 2. Dividends: a portion of a company’s profits gets distributed to shareholders quarterly

  17. Types of Stocks • Income stock: • pays dividends • Usually older, established companies • Growth stock: • Few dividends • Company instead reinvests profits for its own growth • Common stock: • Voting rights to determine company’s decisions • Preferred stock: • Non voting • Receives dividends before common stock holders • If company goes out of business, they get their money back first • Stock splits: • when a single share is divided into 2 or more shares • Occurs when price of a share gets too high, discouraging people to buy

  18. Agenda • 1. Why would someone want to buy preferred stock over common stock? • 2. If you were to give someone advice about picking stocks what is the most important tip you would tell them?

  19. How Stocks are Traded • Stockbroker: • person who links buyers and sellers of stocks • Advises individuals as to what stocks they should buy • Brokerage Firm • Stockbrokers work for businesses that specialize in trading stocks • Charge a fee or commission for each transaction • Online

  20. Stock Exchanges • Major markets for buying and selling stocks • Major Exchanges • NYSE • Largest and most powerful • Restricted number of members who can trade • Handles the largest, most established, and successful companies • Blue chip companies • NASDAQ • Sells slightly riskier stocks from less established companies • High tech and energy stocks • Over-the-counter • Traded electronically • Not an organized exchange

  21. Measuring Stock Performance • Dow Jones Industrial Average • Most used index to tell investors how stocks are doing • Made up of 30 big companies • Represent every important sector in the stock market • S&P 500 • Top 500 companies in the US • Bull vs. Bear Market

  22. Reading Stock Tables • Vocabulary • Sym: symbol of the stock, usually 2 or 3 letters • Div: dividend given to shareholders the last quarter • Yld%: yield, dividend divided by current price • Vol: volume, or the amount of shares that have been traded that day • Hi: highest price for the stock during that day of trading • Low: lowest price for the stock during that day of trading • Close: price of stock at the end of the day • Chg: difference between last week’s price and the most recent price

  23. http://money.cnn.com/magazines/moneymag/money101/

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