1. Economics – Chapter 6
Saving and Investing

2. Section 1 – Why Do People Save?
“Setting aside money for a period of time to use at a later date”
Why do people save?
Where can we send our money for savings? Most Interest Available!
Commercial Banks
Savings and Loans
Credit Unions

3. Saving $ Benefits Everyone People Save $ in Financial
Institutions
Banks then Loan $
To Businesses
More People Have
More Money from
Wages, Dividends
Businesses Use Borrowed
$ to Increase Facilities,
Hire More Employees

4. What are the different types of savings accounts?
Passbook Savings (most secure)
Statement Savings Account
Money Market Account
High rate of interest, but usually require a high minimum balance -$ $10,000!

5. What are Time Deposits?
Requires saver to keep money in account for a certain period of time (maturity).
CD’s (Certificates of Deposits)
Longer the maturity the higher the rate

6. Investing: Stocks and Bonds
Chapter 6
Section 2

7. What is the difference between saving and investing?
Saving – putting away money to use at a later date (secure)
Investing – using money and placing it in various funds with the intention to make more money
Savings – return guaranteed, investing it is not

8. Risk vs Return! The higher the risk – the higher the return!
Penny Stocks
Stocks
Mutual Funds
Bonds
T- Bills, Notes, Bonds
CD’S
Money Markets
Passbook Savings

9. What are Stocks? Shares (securities) of a company
Entitles holder profits/assets of company
Become part owner of the company – stock certificates
Stockholder!

10. How do stockholders make money?
Dividends from the company
Paid when company makes a profit
May receive them more than once a year
Selling the stock for more than they paid for it
Bought at $10 share / Sell at $25
Speculate – buying and trading to make money!

11. Loss vs Gain Capital Gains Capital Loss
Profits
Capital Loss
Losses
Must be reported on income taxes as a gain or loss on overall income

12. How do I invest? Broker NYSE over 2500 American companies
Charges a fee for his/her services
Internet sites as low as $7
NYSE over 2500 American companies
Nasdaq – tech stocks

13. Safeguarding the Markets!
Prevent another “Black Tuesday”
Securities and Exchange Commission
Prospectus must be sent to every shareholder
State security laws
Il. Sec.of State – Securities Division

14. What are Mutual Funds?
Company that pools money of many people to buy a diversity of stocks (some high risk, some more secure)
Losses in one area are offset by gains in other areas
Long-term investments
S and P 500 indicator (Standards and Poor)

15. What are Bonds?
“Certificate issued by a company or government in exchange for borrowed money”
Pays a stated rate of interest and promise to pay back entire amount in a given period of time
Schools use this many times!

16. Other types of Bonds Tax-exempt bonds
Do not have to pay taxes on the interest that is earned!
Good investments for wealthy who would ordinarily have to pay high taxes from their investment returns
Savings Bonds –way the government can borrow money
T-Bills, T –Bonds – government supported investments – higher rates for higher minimum amount

17. Special Savings Plans and Goals
Section 3
Chapter 6

18. Investments for Retirement
Company Pension Plans
401 (k) Plans – Matching Fund
Individual Plans
Keogh Plan – self employed can set aside up to 15% and deduct that from income taxes
IRA – contribute up to $4000 a year and deduct from taxes – 59 ½ out

19. Roth IRA’s Real Estate Newest type of IRA
Up to $4000 annually invested
Interest earned is tax-free forever!
When you take out the $ when you retire, do not have to pay taxes on the interest earned.
Real Estate
Usually more long-term
Not recommended for immediate cash

20. And Finally ……… Always Remember – Risk vs Return
Diversify your investments
Mutual Funds
The greater your income and savings the more you can diversify!
The earlier you begin .. The bigger the payoff later!