Saving and Investing Types of Vehicles Introduction Would you rather be an owner or lender? owner: own a piece of the business lender: lend money to.

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Saving and Investing Types of Vehicles

Introduction Would you rather be an owner or lender? owner: own a piece of the business lender: lend money to business or gov’t and receive interest What kinds of investments do you have?

Types of Savings/Investments Demand Deposits Can withdraw money when you want with no penalty Time Deposits Money must stay in investment for a specified period of time

Types of Savings/Investments Savings Account (demand deposit) Low interest Low risk because insured High liquidity - funds are easily accessible Certificates of Deposit (CDs) (time deposit) Time deposit (fixed rate paid for certain time) Lower interest but higher than U.S. Savings Bond or Savings Account because of time commitment Low risk because insured Penalty if cashed before expiration date(may be higher than the interest earned)

Types of Savings/Investments U.S. Savings Bonds Lending your money to the government Low interest but usually higher than savings accounts Low risk Long period of time—designed to be held up to 30 years Penalties if cashed before maturity

Money Market Deposit Accounts (MMDAs) Similar to checking accounts—offered by banks Low interest but usually higher than savings accounts Low risk because insured Limit number of checks written Balances required tend to be higher Money Market Mutual Funds (MMMFs) Similar to MMDAs but offered by mutual fund companies Higher interest than MMDAs because not insured Low risk but not guaranteed or insured Types of Savings/Investments

Others Stocks (ownership of company) bonds (U.S, corporate and municipal) Loans not ownership “junk bonds” (“iffy” businesses) mutual funds (pools investors’ money) real estate collectibles (antiques, sports cards, etc.) futures contracts Types of Savings/Investments

Basic Investment Principles When is it appropriate to begin an investment program? income exceeds your spending savings is enough to cover emergencies and to allow you to take advantage of unexpected opportunities assets are adequately protected against personal or financial loss through appropriate insurance coverage Key to Successful Investing persistent and consistent saving (uninterrupted)

Review Types of Savings/Investments

Assignment Find rates for bank investments from three banks (savings account, certificate of deposit, and money market accounts)