1. Learning, Earning, and Investing Investment Basics

2. Funding for this workshop is provided by: National Council on Economic Education US Dept of Education University of Illinois Extension

3. Instructors
Dr. Angela Lyons, Associate Professor University of Illinois Urbana-Champaign (217) ;
Debra Bartman, Extension Educator Quad Cities Center (309) (x217);
Patricia Hildebrand, Extension Educator Effingham Extension Center (217) ;

4. Objectives Introduce: (1) Learning, Earning, and Investing
(2) The Stock Market Game
(3) Plan Well, Retire Well
Experience activities to use in the classroom
Answer questions about curriculum and other resources

5. You will receive…
Curricula with lessons and activities to use in the classroom
6 CPDUs
Certification to reproduce and replicate workshop materials
Network of colleagues to share experiences
Resources available at U of I Extension

6. Why Is Saving and Investing Education Important?
Setting the Stage….

7. Increasing Consumer Responsibilities
Movement towards the privatization of social security.
Over 92% of pensions today are defined contribution plans, not defined benefit plans.

8. Financial World Has Become More Complex
The number of financial services offered to consumers has increased.
There has also been an increase in the number of financial products that are offered.
Credit-scoring technology has improved.

9. People Are Involved in the Financial Markets
Millions of small investors have increased their net worth by participating in the stock and bond markets.
Millions of other investors depend on income from owning stocks and bonds.

10. Importance of Financial Education
Many Americans, especially young adults, lack the basic knowledge and skills needed to make informed financial decisions and manage their investments effectively.

11. It’s Hard to Learn What You Are Not Taught
Financial education is a growing national priority.
Stock market simulations and games are very popular.
But young people can’t learn financial skills unless they are taught explicitly.

12. Several studies of financial education programs, especially those with specific objectives such as increasing savings or decreasing debt, have succeeded in improving the financial behaviors of young people and other consumers.

13. The Federal Reserve Board
Where Do You Find Data?
The Federal Reserve Board
Brian K. Bucks, Arthur B. Kennickell, and Kevin B. Moore “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances.” Federal Reserve Bulletin, vol. 92, pp. A1 – A38.

14. Learning, Earning and Investing An Overview
23 lessons
High school and middle school
Complete lesson plans
Web site (
Accompanies stock market simulations or games
Linked to standards: NCEE, NCTM, Jump$tart
Field tested and reviewed

15. Table of Contents Theme 1: Basics of Financial Investing Why Save?
Investors and Investments
Invest in Yourself
What Is a Stock?
Reading the Financial Pages: In Print and Online
What Is a Bond?
What Are Mutual Funds?
How to Buy and Sell Stocks and Bonds

16. Theme 2: The Markets What Is a Stock Market?
The Language of Financial Markets
Financial Institutions in the U.S. Economy

17. Theme 3: Financial Planning
Building Wealth Over the Long Term
Researching Companies
Credit: Your Best Friend or Your Worst Enemy?
Why Don’t People Save?
What We’ve Learned

18. Theme 4: The Markets and the Economy (High School only)
How Financial Institutions Help Businesses Grow
How Are Stock Prices Determined?
The Role of Government in Financial Markets
The Stock Market and the Economy: Can You Forecast the Future?
Lessons from History: Stock Market Crashes
Investing Internationally: Currency Value Changes
Investing Involves Decision Making

19. Lessons Description Key concepts Objectives Time required Materials
Procedure
Visuals
Activities
Closure
Assessment (multiple-choice and essay)
* Glossary terms for all lessons (pp )

20. Key Features of the LEI Web Site
About the Materials:
Table of Contents
Sample Lessons
FAQs
Order Information
Resources:
Interactives
Related Web Links
Related Lessons
Glossary
Visuals on PowerPoint
State Stock Market Games

21. Web Site:

22. Table of Contents:
Lessons
Concepts
National Standards

23. Resources: Interactives Investment Web links Related Lessons Visuals
Stock Market Simulations
Workshop Leader’s Guide

24. LEI Lessons
Lesson 4: What is a Stock? Lesson 7: What are Mutual Funds? Lesson 12: Building Wealth for the Long-Term Lesson 15: Why Don’t People Save? Lesson 18: How Are Stock Prices Determined?

25. Lesson 4
What is a Stock?

26. Income, Saving and Investing
Households earn income.
Income is payments received by a household by selling or renting productive resources.
Households usually spend some of their income and save some of it.
Saving is income not spent on consumption or taxes.
Some households use their savings to purchase stocks.

27. Activity 1: Certificate of Ownership (p.42)
Students work in small groups that are households.
For each correct T/F answer, students receive a strip of paper worth 15 shares of stock in The Economics and Mathematics Knowledge Company.
Groups that answer all questions correctly receive a stock certificate worth 150 shares. Groups that answer fewer questions correctly receive fewer shares.

28. Visual 1: Mathematics and Economics Questions
Stocks represent ownership in a corporation.

29. Answer 1.
True.
Stocks are shares of ownership in a corporation.

30. Question 2.
50% written as a decimal is 5/100.

31. Answer 2.
False.
50% written as a decimal is .5.

32. Question 3.
Mark bought 100 shares of Nike stock, and each share sold for $ If no fees were involved, Mark paid $3,550 for the shares.

33. Answer 3.
True.
100 x $35.50 = $3,550.

34. Question 4.
If Jenny has $100 in a savings account and earns 2 percent interest this month, she has earned $20 in interest.

35. Answer 4.
False.
2 percent of $100 = $2.00

36. Question 5.
The closing price for a share of Wal-Mart stock was This means that the price of the share was $37 and one-quarter of a dollar. One-quarter of a dollar is .20.

37. Answer 5.
False.
The closing price for a share of Wal-Mart stock was $37 and one-quarter of a dollar. One-quarter of a dollar is .25, not .20.

38. Question 6.
People who own stocks are guaranteed a return on the money they have invested in stocks.

39. Answer 6.
False.
Investing is stocks involves risk. Less risky investments are savings accounts and government bonds.

40. Question 7.
The only way stockholders make money is through dividend payments while they own the stock.

41. Answer 7.
False.
Stockholders make money through dividend payments or by owning stocks that increase in value.

42. Question 8.
One way stockholders make money is to sell their stock for more than they paid for it.

43. Answer 8.
True.
A common way for stockholders to make money is to sell their stock for more than they paid for it.

44. Question 9.
Stockholders can reduce the risk on their stock investment by diversifying their portfolios.

45. Answer 9.
True.
A common way for stockholders to reduce risk is by owning stocks in a variety of corporations.

46. Question 10.
The New York Stock Exchange is the only place where people can buy and sell stocks.

47. Answer 10.
False.
In addition to the New York Stock Exchange, people may buy stocks on the American Stock Exchange and the NASDAQ.

48. Shares and Dividends Calculate shares Calculate dividends
Dividends are equal to 1/5th of a share
15 shares = 3 pieces of candy (1/5 X 15 = 3)
30 shares = 6
45 shares = 9
60 shares = 12
75 shares = 15, etc….

49. Wrap-Up Role playing (Activity 2) Closure (discussion questions)
Assessment (multiple choice and essay)

50. Lesson 7
What are Mutual Funds?

51. Mutual Funds and Investment Clubs
In this lesson, students form class investment clubs that work much in the way mutual funds do.
They invest $3,000 in up to six stocks.
One year later they revalue their shares and determine how the total value has changed.
They read about mutual funds to learn about the advantages of diversification.

52. Class Investment Clubs
Each club has $3000 to invest.
You may buy any of 6 stocks, but you must buy at least 3 stocks. You may divide money among all 6 stocks if you wish.
You must invest the entire $3000.

53. Activity 1: Year One: An Example (p. 95)
Company
Price
per
Share
No. of Shares Owned
Amount Invested
American Cellular
$ 5
100
$ 500
Big Box Stores
$ 20 50
$1,000
Biotech Industries
$ 10
General Grocery
Giant Auto
$ 10
Gold Mining Group
Total Investment Value
XXXX
$3,000

54. Activity 2: One Year Later: An Example (p. 96)
Company
Price
per
Share
No. of Shares Owned
Amount Invested
Investment Value
1 Year Later
American Cellular
$ 8
100
$ 500
$ 800
Big Box Stores
$ 23 50
$1,000
$1,150
Biotech Industries $
General Grocery
$ 22
Giant Auto
$ 11
$1,100
Gold Mining Group
$ 4 $
Total Investment Value
XXXX
$3,000
$3,450

55. Yahoo! Finance

57. MSN Money

61. CNN Money

63. Visual 2: Types of Mutual Funds
Low Risk and Low Potential Reward
High Risk and High Potential Reward
Money-market funds (short-term securities)
Bond funds (corporate or longer- term government bonds)
Income funds (high- yield stocks and bonds)
Growth funds (larger company stocks long-term capital gains)
Aggressive growth funds (smaller company stocks; short- and long- term capital gains)

64. Lesson 23, Visual 2: Risk Pyramid

65. Preview of Coming Attractions…. Lesson 12 Visual 13: Mutual Funds
A mutual fund pools investors’ money.
The fund puts its investors’ money into the markets on their behalf.
In effect, investors own small amounts of many different assets.
Mutual funds enable investors to avoid the risk that comes from owning any one asset. In other words, mutual funds make it easy to diversify.

66. Other Activities Mutual Fund Facts (Activity 3)
A Mutual Fund Prospectus (Activity 4)
Each has discussion questions

67. Building Wealth for the Long-Term
Lesson 12
Building Wealth for the Long-Term

68. Factors that affect how much savings grow:
Time
The earlier or longer you save, the more
savings you will have.
Investment Size
The more you save each year from your
income, the more savings you will have.
Rate of Return
The higher the interest rate or rate of
return, the more savings you will have.

69. The earlier you save, the more $$’s you will have.
Time Value of Money
The earlier you save, the more $$’s you will have.

70. Three Rules for Building Wealth
Start early
Give money time to grow.
Buy and hold
Keep your money invested.
Diversify
Don’t put all your eggs in one basket.

71. A Tale of Two Savers (revisited)
Charlayne becomes a millionaire by accident.
Marcus’ mistake.
Explain how Charlayne, the accidental millionaire, followed all 3 rules.

72. Visual 4: The Magic of Compounding
When you save, you earn interest.
When you take the interest out and spend it, it stops growing.
But if you leave the interest in your account so it can grow, you start to earn interest on the interest you earned previously.
Interest on interest is money you didn’t work for. It is money your money makes for you!
Over time, interest on interest can increase your total savings greatly.

73. Visual 10: Forms of Saving and Investing: Benefits and Costs
Savings accounts:
Provide a small but steady return.
Certificates of deposit:
Very safe, but instant access carries a penalty.
Bonds:
Lending money to a corporation or government, with a promise of
higher returns than those offered by bank savings accounts and CDs.
Stocks:
Part ownership in a company, offering higher risks and, potentially,
higher returns than some other investments.
Real estate:
The risks and benefits of being a landlord.

74. Activity: Trade-Off Between Risk and Return
Floor Markers:
Mattress
Savings Accounts
CDs
Bonds
Stocks
Mutual Funds
Real Estate

75. Visual 11: Investment Situations: Which Form Will You Choose?
You have $5,000 to invest. No other information is available.
You have $4,000 that you’ll need six months from now.
You inherited $10,000 from your great-aunt; she has suggested that you save it for use in your old age.
You are just starting a career and can save $50 per month for retirement.
A new baby arrives, and Mom and Dad plan to save $100 a month for the child’s college education.

76. Lesson 15
Why Don’t People Save?

77. The Risky Behavior Mystery
People usually know what is good for them, but they often act as if they don’t know.
Some people:
Drive too fast
Fail to take medications
Smoke
Why would people do things that don’t seem to be in their interest?

78. Visual 1: Why Don’t People Do What They Should Do?
Question
Number of Yes Responses
How many of you know that smoking is unhealthy?
How many of you know people--even people your age--who smoke?
How many of you know that eating foods that are high in transfats, such as packaged cookies, margarine and peanut butter, isn’t healthy?
How many of you know people who eat foods that are high in transfats?
How many of you know that regular exercise provides many health benefits?
How many of you know people who don’t exercise regularly?

79. Perhaps the answer lies in identifying the costs and benefits….
All the things that have to be given up when a choice is made.
Benefits:
Gains or favorable outcomes that make people more satisfied when a choice is made.

80. An analogy
Saving is like diet and exercise.

81. Benefits and Costs of Diet and Exercise (Discussion Questions)
What are the benefits of eating a healthy diet and exercising regularly?
Do the benefits of diet and exercise occur now or in the future?
If people choose a healthful diet and exercise regularly, are they guaranteed these benefits?
What are the costs of choosing a healthful diet and exercising regularly?

82. Saving
Most people know that starting to save money at an early age and saving regularly are good habits that lead to financial well being.
Yet many people fail to save early and regularly.
Why?

83. Costs and Benefits of Saving
The costs of saving are immediate and certain.
People have to give up things they could buy now.
The benefits of saving occur in the future and are uncertain.
Events might prevent people from reaping the benefits of saving.

84. Opportunity Cost and Incentives
The opportunity cost of spending might change how people analyze the costs and benefits of saving.
Setting goals is an important factor related to saving.
Goals act as incentives to save.
Interest provides another incentive to save.

85. Activity: Setting Savings Goals
What are some things for which you would like to save?

86. Short-Term Savings Goals Medium-Term Savings Goals
(One year or less)
Medium-Term Savings Goals
(One to five years)
Long-Term Savings Goals (Over five years)

87. Activity 6: A Game (p. 213) Key Concepts: Savings Costs and Benefits
Opportunity Cost
Goals (short, medium, long-term)
Incentives

88. How are Stock Prices Determined?
Lesson 18
How are Stock Prices Determined?

89. Visual 10: Laws of Supply and Demand Applied to Financial Markets
The law of demand states (regarding stocks) that buyers choose to purchase more shares at lower prices and fewer shares at higher prices.
The law of supply states (regarding stocks) that sellers choose to sell more shares at higher prices and fewer shares at lower prices.
An equilibrium price exists when the quantity of shares demanded at that price equals the quantity of shares being supplied.
Stock prices change as a result of changes in the supply and demand for shares of the stock in question. Shifts in supply and demand can establish new equilibrium prices.

90. Activity: Stock Price Simulation Game
Students use knowledge of supply and demand to participate in a stock market simulation, which shows how the price of a share of stock is determined in a competitive market.
Divide the class into buyers and sellers. Distribute BUY and SELL cards and score sheets. Assign one student to be keeper of the cards and another to record the transactions.
Clear a space that will serve as the TRADING FLOOR. When the MARKET IS OPEN, buyers and sellers meet on the trading floor and try to agree to a price for one share of stock.

91. Buyers start the game with one BUY card on their score sheet
Buyers start the game with one BUY card on their score sheet. The goal is to buy at the lowest price they can. If the price they pay is equal to the price on their BUY card, buyer breaks even. If less than, there is a gain. If more than, there is a loss.
Sellers start the game with one SELL card on their score sheet. The goal is to sell at the highest price they can. If the price they pay is equal to the price on their SELL card, seller breaks even. If more than, there is a gain. If less than, there is a loss.
Students buy (or sell) as many shares of stock as they can in the allotted time. But the price of a transaction must always be in multiples of 5 ($5, $10, $15, $20 and so on).

92. As soon as a stock is bought (sold), students record the transaction on their score sheets. In addition, SELLER reports the negotiated price to the recorder.
They then turn in their BUY (or SELL) card, receive a new card, and begin the negotiation process again.
Students have 5 minutes to make transactions and then the TRADING FLOOR IS CLOSED.
The game is played in three 5-minutes rounds. The goal is to make as much money as you can by the end of the game.

93. Helpful Resources University of Illinois Extension
Consumer and Family Economics
National Council on Economic Education
Illinois Council on Economic Education

94. University of Illinois Extension Consumer and Family Economics

95. NCEE

96. Summary and Questions

97. The Stock Market Game™ Program