1. Making Money Work for You
In Units 1 & 2 students have learned some powerful tools for reaching financial goals, including a financial plan to help map a route of spending to achieve goals. You’ve been talking about “Pay Your self first” in Unit 2 and that is carried forward into Unit 3.
In this unit more powerful tools- saving and investing-putting your money to work are introduced. The focus of unit 3 is investing. Students might not know that they can in vest their money and earn income from it as well.
The difference between saving and investing is a key topic.
Please open your Teaching Guide to Unit 3
Unit 3 - Investing:
Making Money Work for You

2. Agenda Overview of Unit 3- Investing Activity from the curriculum
Optional activities, supplementary materials
Website suggestions
Questions

3. Unit 3 Target Competency
Propose a personal saving and investing plan

4. Learning Objectives Differentiate between saving and investing
Assess the time value of money
Compare investment options
Compare the relationship between risks and returns related to saving and investments
Recommend ways to integrate savings and investing strategies into financial planning

5. Savings and Investments
Unique
Savings
Features
Unique
Investment
Features
Common
Features
This is a PowerPoint slide from the NEFE website to guide students in discussion comparing saving and investing.
What's the difference between saving and investing?
Unique features:
Savings is setting aside money for short-term goals
saving accounts
CDs
Money Market funds- not insured
Readily available-liquid
Many FDIC insured
Investing is setting aside money for long term goals
long term parking/goals
stocks, real estate, mutual funds
May not be readily available / liquid
Potential for higher rate of return
Higher risk
Common features: PYF, a basic principle that is reinforced is that the amount saved is not nearly as important as simply developing the saving habit by “paying yourself first”, a them introduced in unit 2.
While savings generally involves less risk and one of the safest investment around, it is subject to the risk that that earnings won’t keep pace with inflation, thereby reducing the investors’ future purchasing power.
Help us reach financial goals
PYF- principle applies
Basic principles of in vesting- time value of money more money, more time, more interest the greater your investment will grow
What are some features common to both investments and savings?
3-A

6. In Unit 3 Time Value of Money Key Investments Principles
Saving and Investment Choices
3 addition key concepts in Unit 3
Time Value of Money
Key Investments Principles
Saving and investment Choices

7. Time Value of Money page 30 Student Manual
Compounding
--Albert Einstein
“Compounding is the 8th wonder of the world”
Exercise 3B: The Power of Compounding
Compounding is making money work for you, it grows in value or compounds.
Earning interest on interest
Albert Einstein “compounding the 8th wonder of the world”
Assignment in the Student workbook on page 30 figuring compound in interest- Hand held calculators nice.
Some inexpensive “Dollar Store” Have figure compound interest

8. Investing Weekly at 5% Interest
Amount Saved
Per Week
Value After
10 Years
$ 7.00
$ 4,720
$ 14.00
$ 9,440
$ 21.00
$ 14,160
Time value of Money from the NEFE PowerPoint Slides –can run as an overhead.
Is a dollar always worth a dollar? May seem like a silly question but as we know is not always worth a dollar. The value of a dollar changes dramatically depending on when you get it and whet you do with it. Time is a critical variable in the exact value of a dollar. Time value of money refers to the relationship among time, money and rate of interest.
Here’s an example- if you save $7 a week at 5% in 10 years you’d have $4720.
If you save
$14 you’d have $9,440
$21--$14,160
$28--$$18,880
$35--$23,600
$ 28.00
$ 18,880
$ 35.00
$ 23,600
3-B 1

9. Rule of 72 72 = 72 = Years Needed to Double Investment Interest Rate
Required =
Years Needed to
Double Investment
Anyone heard of the rule of 72?
Time Value of Money
Rule of 72- How long it takes money to double in value
Divide 72 by the interest rate to determine the number of years it will take your money to double
How long will it take money to double at 6%- 12 years
On the other hand, you have a set period of time in mind. You can figure our what interest rate you will need to double your money.
If you need money to double in 8 years what interest do you need? 9%
Page 32- Student Manual
3-H

10. Key Investment Principle
Time is money
More time
More money
More interest
More Money
Time is money. 3 factors that determine how much money will be available to meet your financial goals
The more time you have to save, the more money you will have at the end of the period.
The higher the rate on interest you can earn, the more money you will have at the end of the time period.

11. Page 67 of the Teacher Manual
Page 29 of Student Manual
Page 67 of the Teacher Manual
Touched on time and then expanded and on this key point. The more time you have to reach your savings goal, the more money you will have at the end of that time. This example is very graphic and illustrates the impact of time.
Assume you start investing $2000 every year when you are 18. You put it into an account that grows by 7% each year, and continue to invest the same amount for 10 years. Then you stop and just let the money sit for the next 38 years, where it continues to grow at 7% a year, until you’re 65.
Now your sister decides to invest at age 31 and puts $2000 a year into an account that also earns 7% a year— and does it for the next 35 years, until she turns 65. Who will have the most money?
Even though you sister invested more than twice as much as you did, you end up with $84,944 more. Why? You took advantage of time , by started to save earlier.
Who has the most?

12. Key Investment Principle Diversification
Don’t have all your eggs in one basket
People feel differently about how much risk they should take on. Some of us are conservative and want to keep money in a safe place. Others are more aggressive and are willing to invest in some place riskier, like the stock market.
Regardless of your risk tolerance every wise investor knows that diversification is a critical element of any investment plan.
Diversification is spreading your invested dollars among several different investments. It is simply spreading your money around. Not having all your eggs in one basket.

13. Financial Planning Pyramid
Penny
Stock
Commo- dities
Collectibles
Speculative
Stock / Bonds /
Mutual Funds
Real
Estate
Blue-Chip
Common
Growth
Mutual
Funds
High-Grade
Convertible
Bonds
Preferred
Balanced
Corporate Bonds
or Mutual Funds
Municipal Bonds
Money Market
Accounts
Certificates
of Deposit
U.S. Savings
Insured Savings /
Checking Accounts
Treasury
Issues
Financial Planning Pyramid
Highest Risk
Highest Earnings
Lower Risk
Lower Earnings
Another one of the PowerPoint slide to use in teaching
Figure 3-2 and page 33 of the student workbook.
Another key investment principle is the relationship of risk and reward
When many people hear the word stock they immediately think of the risks that go with it.
But with the higher risk comes the potential to earn higher rewards on your investment.
The risk-to- return relationship is another key investment principle
Today when people hear the word stock market they think of 2001
3-J

14. Activity Exercise 3D: Risk vs. Reward Page 78 Instructor Manual
Page 34 Student Manual
Page 79 Answer key Instructor Manual
Let’s take a minutes and do Exercise 3D: Find a partner.
In the exercise we have 2 people that have different investment strategies. Read about their situation and then follow directions to compare their investment portfolios.
Carrie Montgomery, age 22 and single, has an emergency fund in an insured savings account. Her other investments include a balanced mutual fund, a growth mutual fund, and collectibles in the form of baseball cards. Sixty percent of the money in these investments is in a growth fund, and 20 percent of the money is in each of the other two investments.
Darren Miller is 22 and also single. He has an emergency fund in U.S. savings bonds. The remainder of his investment program includes equal amounts of money invested in a money mutual fund, high-grade preferred stock, and blue-chip common stock.
Directions:
Use the information provided and refer to the Financial Planning Pyramid to compare and contrast Carrie’s and Darren’s investments.
The answer key is on page 79 of the instructor manual

15. An Array of Investment Options
Income Investments
Lenders
The High School Financial Planning Program approaches income investments as lenders and growth as ownership-owning a piece of the company.
Income investments- referred to as lenders include savings accounts, us saving bonds,
CD’s, Money Market accounts Corporate and government bonds.
With the low rates of return, it is hard to stay ahead of inflation with these saving vehicles.
Savings at 4% vs.
Investments at 7.5%

16. An Array of Investment Options
Growth Investments
Ownership
Stocks
Real Estate
Collectibles
Growth investments include stocks or ownership. These investment represent ownership in a company.
When a company first issues stock, it does so to raise money for itself. The company then puts the money to work to produce products and services. The investor who buys stock actually own a part of the company.
Stock sell for a price and increases over time and ideally the owner will sell high and buy low. This difference between the purchase price and the selling price is called capital gain
Real Estate-pieces of property, land or a building, apartments, undeveloped land, commercial buildings, farmland.
Collectibles- art, coins, cars, stamps

17. An Array of Investment Options
Mutual Funds
Income
Growth
If you want professional help with your investing, may want to buy mutual funds.
Mutual funds pools money form investors and uses the money to buy a particular type investment such as stocks. A fund manger, who is an investment expert, makes all the buy and sell decisions for the investments in the fund. Because mutual funds own a variety of investments, investors enjoy the benefits of diversification, which we discussed earlier. For these reason mutual funds can be a great choice.
Mutual funds are created for several different purposes or objectives. Some are to produce income and invest in bonds, cds and other income producing items.
Some are designed for growth and invest in stocks and real estate.
Mutual funds invest in about every segment of the business world. Technology, food, energy, medical,, precious metals and so on

18. Dollar-Cost Averaging
One-Time Investment
Dollar-Cost Averaging
Amount
Invested
Share
Price ($)
Shares
Purchased
Amount
Invested
Share
Price ($)
Shares
Purchased
$1,000.00
$20.00
50.00
$100.00
$20.00
5.00
$100.00
$19.50
5.13
$100.00
$19.25
5.19
$100.00
$19.75
5.06
$100.00
$19.20
5.21
$100.00
$18.90
5.29
100/19.78 = 5.06 shares, not 5.08 (second to last row on the right)
Total shares purchased then becomes 51.66, not 51.68
We talked about PYF and learned that a little money can build quickly thanks to the power of compounding and choosing the right investments.
Another way to take advantage of time even if you don’t have a lot of money is Dollar Cost Averaging. This is the practice of investing a fixed amount in the same investment at regular intervals, regardless of what the market is doing. It’s another key investment principle to know because it eliminates having to worry about investing at the “right” or “wrong time”
New in this version: this slide shows the difference between a one time investment of $1000, purchasing 50 shares at $20 each vs. dollar cost averaging- investing $100 a month for 10 months and buying at different share prices. This example shows that the average share price was lower and you purchased more shares
$100.00
$18.00
5.56
$100.00
$18.60
5.38
$100.00
$19.78
5.06
$100.00
$20.90
4.78
$1,000.00
$20.00
50.00
$1,000.00
$19.39*
51.66
3-L
* Average Share Price 1 2 3 4

19. Optional Activities Instructor Manual
Unit 3
SM3-1-Dollars and Sense
SM3-2-Are You a Risk-Taker?
Students talk with an adult about investment experiences
In the instructors manual and on the website, a variety of optional activities are outlined to supplement learning. No all teachers will have time to have you complete in class.

20. Taking It Home Students take home a newsletter ( on CD) to read
Students will ask their parents what they've learned about investing
There are suggestions for “Taking It Home” and involving parents with the process.

21. http://hsfpp.nefe.org Student site http://hsfpp.nefe.org/home/
Reminder- no www in the website address
Street Sweeper Game

22. Websites U.S Securities Exchange Commission
The new website is in the process of being developed and websites are not up yet. I’ve added some sites to the PowerPoint that were included on the old website.

23. Teacher and student information sections
Interactive quiz
Calculators

24.
Another popular financial teaching tool is the Stock Market Game.

25. www.tcalc.com www.tcalc.com/millionaire-calculator.html
Time Value website ties to the millionaire theme so popular now. There is a millionaire calculator but it takes into account taxes. You might want to use the monthly savings calculator.

26. 7% $183.55 a month If we have a starting balance of 0
Invest at 7% for 50 year and our goal is $1,000,000
We will have to save $ a month
$ a month

27. 10% $57.72 a month or $14.43 weekly or $2.06 a day
But if you have a 10% return, 50 years and a goal of $1,000,000 you only need to save $57.72.
The stock market has averaged 10.2% over the last 20 years

28. Assessment 3-1: My Investing Plan
Create a personal savings and investing plan
Student's are asked in the final activity of unit 3 to synthesize what they learned in Unit 3 and to create a personal saving and investing plan.
The required criteria is on page 77 of the instructors manual.
Use the decision-making process to select at least two investing products for your investment plan
Outline your investment strategy- amount of invest, how often and when to invest
Predict the potential value of your investments three years from now
Classify investments as income or growth investments
Describe your potential risks and reward of the chosen investments
Balance the diversity of investments
Explain how your investing plan aligns with your intermediate and long term financial goals