2.  Explain what it means to budget, and identify reasons to maintain a budget.  Create and maintain a budget that supports personal and financial goals.  Identify the opportunity cost and benefits of spending and saving.  Calculate investment accumulations for various interest rates and lengths of investments.  Analyze and explain the impact of the amount saved, time, and rate of return on savings growth.

3.  6.5.12G - Analyze the risks and returns of various investments.  15.6.12.G. - Identify strategies for personal financial management.  15.6.12.Q. - Apply the “Rule of 72” to estimate the number of periods required to double an investment.

4.  A financial plan that allocates future income toward expenses, savings, and debt repayment. › “Where does the money go?” › Set up a step by step plan

5.  To determine how much money you have to spend.  To decide how you want to spend your money.  To determine how to spend money in the future.  To learn to live on less than available income.  To stay out of financial trouble

6. 1. Estimate your income. 2. Estimate your current & future expenses 3. Cope with change. 4. Keep personal and financial goals in mind. 5. Balance your budget on a monthly basis.

7.  Become a good consumer.  Exercise will power and self-control.  Develop a good record-keeping system.  Evaluate your budget & financial goals regularly.

8.  Def. - Sums of money put away for future use.  Principal  Principal – the money put into an investment or savings account  Rate of return  Rate of return - earnings from savings or an investment, stated as a percentage of the amount invested; usually calculated on an annual basis.  Return -  Return - the money you earn on your savings, and it is related to the degree of risk related to the type of account.

9. 1. Make a decision to save & set a goal. 1. Be specific, be realistic, set a time frame, state actions to be taken 2. Decide how to save. 1. Do you know how you are spending your money? 2. Where is the money that you want to save come from? 3. Are you going to increase your income/decrease your expenses? 3. Establish and stick to a regular savings plan. 1. Pay yourself first 2. Commit to a specific dollar amount or percentage of your income to save each month 3. Pay off debt and increase amount to being saved each month. 4. Consider automatic payroll deductions to savings acct.

10. Save early & often… 1. Time – the earlier you save and length of time you save. 2. Investment size – the amount of money you save from your income each year. 3. Rate of return – higher the interest rate, increased rate of return. Usually stated as a % and calculated on an annual basis. › Return – the money you earn on your savings or investment.

11.  Def. - Mathematical rule for determining the number of years it will take for an investment to double in value.  Divide 72 by the rate of return (interest rate). › Example – 8% interest rate; 72 / 8 = 9 yrs. › If you put $2,000 in a Roth IRA at 8% interest, it will take 9 years to double to $4,000.

12.  Insured up to $250,000 by FDIC (Federal Deposit Insurance Corp.)  Types: 1. Basic 1. Basic – most common type when first start saving; easily accessible 2. Money Market 2. Money Market – good for short/med. term savings goals, ex. vacation, down pmt. on a car.; easily accessible 3. Certificate of Deposit (CD) 3. Certificate of Deposit (CD) – good when you want savings to grow for specific period of time; limited access - penalty

13.  Interest – the charge for the privilege of saving or borrowing money, typically expressed as an annual percentage rate › Simple interest & compound interest  Compound interest – interest that is earned on the principal and existing interest  Liquidity – the ability to convert your assets into cash

14. Types of Accts. TIMEDEPOSITSWITH-DRAWALSINTEREST BasicTakes longer to “grow” savings No limit on the # of deposits. Sometimes a min. balance Sometimes limited to several each month (varies by bank) Paid monthly; very low rate of return Money Market Can leave it in as long as you wish Min. initial deposit & balance; no limit on # of deposits Sometimes limited each month; may include check writing privileges Paid monthly; usually higher than basic savings acct. CDSet for a specific amt. of time; can add time One time deposit, specific amount of money No withdrawals; penalty fee for early w/d. Normally higher than basic & MM.

15. 1. Start early 1. Start early – give money time to grow. *Compound interest – “interest on interest,” money you didn’t work for; your money makes money for you! 2. Buy and hold 2. Buy and hold – keep your money invested. 3. Diversify 3. Diversify – to invest in a variety of stock, bonds, money market accts., etc., in order to spread risk. › “Don’t put all of your eggs in one basket”.

16. Mutual Funds IRA’s Savings Accounts Stocks & Real Estate

17.  Stocks – part ownership in a company, higher risk & returns  Bonds - lending $ to corporation or gov’t, promise of higher returns.  Mutual funds – a pool of money used by a company to purchase a variety of stocks, bonds or money market instruments. (easy diversification)  Real estate – the risks and benefits of being a landlord

18.  Stock market  Stock market – a market in which the public trades stock that someone already own; the buying and selling of stock.  Primary market  Primary market – the market where new securities are offered for sale for the first time.  IPO – Initial Public Offering  IPO – Initial Public Offering - a company’s first sale of stock to the public › Stocks & bonds sold only to investment bankers & best customers › Corporation/government receives money from sale of stocks. › Remainder of stocks sold on the Secondary Markets

19.  Secondary market  Secondary market – a market in which stocks can be bought and sold once they are approved for public sale. Examples: › New York Stock Exchange (NYSE) › American Stock Exchange (AMEX) › NASDAQ  Not directly linked to the companies issuing stock.  Money from sale of stock goes to those selling the stock, not the corporation  Dividend  Dividend – a share of a company’s net profits paid to stockholders.