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Saving and Investing

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Saving and Investing Making Money Work for You! What is the difference? Saving safe, accessible; usually only earns a small amount of interest; good for short ... – PowerPoint PPT presentation

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Title: Saving and Investing


1
Saving and Investing
  • Making Money Work for You!

2
What is the difference?
  • Saving safe, accessible usually only earns a
    small amount of interest good for short-term
    goals
  • Investing risky higher rate of return good for
    long-term goals

3
Advantages of Saving
  • See Pg. 29 of your Financial Planning Book

4
Time Value of Money
  • Refers to the relationship among time, money and
    rate of interest
  • Compounding Interest
  • Pretend you are saving 10 at 4 interest for 3
    years.
  • Year 1 Year 2 Year 3
  • 10 x 1.04 10.40 x 1.04 10.82 x 1.04
  • 10.40 10.82 11.25
  • See Pg. 31 of your financial planning book

5
Time Value of Money
  • The Rule of 72
  • See how long it takes to double your money by
    dividing with 72
  • 72 / interest rate of years needed
  • 72 / of years interest needed
  • See Pg. 32 of your financial planning book

6
The Rule of Investing
  • Lower Risk Lower Return
  • Higher Risk Higher Return
  • (see pg. 33 in your Financial Planning Book)

7
Types of Investments
  • Money Market a type of savings account offered
    by banks
  • Limits the number of times you can withdraw money
  • Usually require a higher minimum balance
  • Pays a higher rate of interest than savings
    accounts

8
Types of Investments
  • Savings Bond formal agreement where the
  • borrower uses your money for a set period
  • of time and you will be paid a set amount of
  • interest in return
  • Higher interest than savings
  • Can be held for a period of up to 30 years
  • Must pay a penalty if money is removed before the
    end of the term
  • Often government-issued

9
Types of Investments
  • CD (Certificate of Deposit) Bank
  • version of a Savings Bond
  • Can be set for a period starting as low as 3
    months
  • Usually pay a slightly higher rate of interest
    than savings bonds
  • The longer the term, the higher the rate!

10
Types of Investments
  • Mutual Fund an investment in a
  • collection of stocks and/or bonds
  • Money is spread out, so there is less risk than
    investing in individual stock
  • Can be sold/cashed in at any time
  • (see pg. 39 of your financial planning book)

11
Types of Investments
  • Stock owning share in a company
  • One of the riskiest investments, but over time
    can yield the highest return
  • Can be sold/cashed in at any time
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