UNIT VII – Personal Financial Literacy Saving and Investing UNIT VII – Personal Financial Literacy

Saving Your Money Save early Save often Pay yourself first (make it a fixed expense)

Types of Savings Accounts Definition Return Standard Savings Account Certificates of Deposit Money Market Accounts U.S. Savings Bonds Accounts at a bank, savings association, or credit union Rates are relatively low Bank notes for a set period of time at a fixed interest rate Rates are usually higher Savings accounts offered by banks that require a high minimum balance Rates are usually higher Government issues bonds as one of its ways of borrowing money Rates are usually higher

Saving and Risks Multiple ways to save money The more risk you take, the higher the interest rate will be It is important to DIVERSIFY your savings – “Don’t put all your eggs in one basket.”

Investments Stocks – partial ownership of a business can give you steady returns (dividends) and go up in value to give you more money Bonds – lending money to a company or government to gain interest. Low risk, but low earnings Mutual Funds – a variety of high risk stocks with low risk bonds makes this choice less risky.

Pyramid of Risk Speculative Stocks Real Estate / Collectibles Individual Stocks Mutual Funds Certificates of Deposit Savings Accounts U.S. Savings Bond

Compounding Interest Money is really made by interest adding up over time Example: $2000 @ 8% interest will give $2160, the next year it would be $2172.80 which is only $12.80 But if you saved $2000 a year plus the interest from 22 to 65 you would ultimately end up with $713,899 instead of $86,000