Download PF 8.01

Unit 8 – Apply procedures for
managing personal finances.
Obj. 8.01 – Understand options for
saving and investing
Essential Questions
• How are saving and investing similar and how
are they different?
• Why do some people find it so difficult to save
and invest?
• What “rules” can help build smart saving and
investing habits?
• What factors should be considered when
selecting saving and investing options.
SAVING vs. INVESTING
SAVING
DEFINITION
•Setting aside
present income
for future use.
•Portion of
income NOT
spent on
consumption.
INVESTING
•Purchasing assets
that earn interest
over time.
•Investments are
assets purchased
with the goal of
increasing income.
SAVING vs. INVESTING
SAVING
INVESTING
PRIMARY •To make money •To make a profit
PURPOSE available for
over time.
future needs.
SAVING vs. INVESTING
REASONS
FOR
SAVING
INVESTING
•To prepare for
emergencies
•To prepare for
major purchases
•To achieve
financial goals
•To pay for
recurring expenses
•To prepare for the
future
•To prepare for
retirement
SAVING vs. INVESTING
SAVING
INTEREST
EARNINGS
INVESTING
•A bonus or side •The main focus
benefit
SAVING vs. INVESTING
SAVING
RETURN •Usually earns
lower rates of
interest
INVESTING
•Usually earns
higher rates of
interest
SAVING vs. INVESTING
SAVING
LIQUIDITY •Money may be
withdrawn at
any time.
INVESTING
•Money may not be
easily accessible
SAVING vs. INVESTING
SAVING
VOLATILITY
INVESTING
•Usually not
•Rate of return and
volatile; rates are value may change
fixed
suddenly and
significantly
SAVING vs. INVESTING
SAVING
RISK
INVESTING
•Usually little risk •Usually more risk;
of losing money but risks may be
necessary to make
a profit
WHY Don’t/Can’t We Save??
• Not able to meet current needs and or wants
• Not aware of how much needs to be saved for
future goals
• Over-relying on credit for emergencies
• Over-relying on job security and insurance
SAVING/INVESTMENT “RULES”
• Find the Rule which helps
YOU save/Invest!!
“RULES”
• View saving and investing as FIXED
expenses
–Like rent or car payment:
• MUST be made
• MUST be budgeted amount
“RULES”
• Rule of Saving: Pay yourself first; take a
portion of your earnings for
saving/investing before spending ANY
of your paycheck
• Easiest way to follow is payroll
deduction or automatic bank draft!!
“RULES”
• 70-20-10 Saving and Investing Rule: for any
money earned, spend 70%, save 20% and invest
10%
• Tough Rule – but will help you get wealthy FAST
“RULES”
• Savings and Investing Plan: If your values or
lifestyles make saving 30% unrealistic, start a
plan to continually save/invest a fixed amount
• Use a “step” approach; aim to increase % each
year
“RULES”
• Rule of 72: Divide 72 by the rate of interest
earned on an investment to find the
number of years needed to double an
amount of money invested.
• Easy way to tell if your plan will meet your
financial goal!
FACTORS to CONSIDER
• When choosing saving and investing options:
–Liquidity
–Minimum deposit/balance
–Interest rate/rate of return
–Risk factors
–Transactions
–Security
Research Project
• Research your assigned option and present
why you would recommend your option
Include the following information about your
option:
– Definition
– Minimums
– Withdrawals or liquidity
– Interest rates/rates of return
– Transactions
– Security and risk factors
OPTIONS
•
•
•
•
•
•
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Savings Accounts
Money Market Accounts
Certificates of Deposit
Individual Retirement Accounts (IRAs)
Stocks
Bonds
Mutual Funds
Collectibles