Download If You`re So Smart Why Aren`t You Rich

BELL RINGER
 USING A CIRCLE MAP, brainstorm a list of ways that you
can save and invest wisely.
 Be ready to take notes after a brief class discussion…
IF YOU’RE SO SMART, WHY AREN’T
YOU RICH?
Financial Services and Investment Plans
(ECON-U1-L3)
SSEPF1c; SSEPF2a-b
INTRODUCTION
Deciding how to save or invest money is important
and exciting. But because there are many different
saving and investment possibilities,
understanding and evaluating the options can be
confusing. The purpose of this lesson is to introduce
students to some basic saving and investment
options and vocabulary. Students apply The
Decision Grid introduced in Lesson 2 to evaluate
the trade-offs involved in five different saving or
investment opportunities.
CONCEPTS
 Capital
 Investment
 Savings
 Opportunity cost
 Securities: stocks, bonds, mutual funds
 Savings accounts, certificates of deposit
 Risk versus return
 Liquidity
CONTENT STANDARD
In every economic system, consumers, producers,
workers, savers, and investors seek to allocate
their scarce resources to obtain the highest
possible return, subject to the institutional constraints
of their society.
OBJECTIVES
 Review and discuss different meanings for the terms
“investment” and “capital.”
 Discuss basic rules for wise investing.
 Demonstrate understanding of five different investment
options using a decision grid.
ECONOMICS
 INVESTMENT: spending by businesses on capital
goods such as factories, tools, and machinery.
Sometimes called “real investment.” Investment in this
sense results in capital formation and leads to economic
growth.
 CAPITAL: goods produced by people to help them
make other goods. Sometimes called “capital goods” or
“real capital.” The economic definition of capital refers
to things such as factories, machines, and tools.
PERSONAL FINANCE DEFINITIONS
 INVESTMENT: buying assets such as stocks or bonds
with the expectation of earning interest or income, or
making a profit.
 CAPITAL: an asset such as money owned or used by a
person or a business. Using personal finance definitions,
capital is used to invest in something to try to produce
more money or wealth for the investor.
IN THIS LESSON…
 The personal finance definitions of capital and investment differ
from the economics definitions.
 In this lesson, investment will be used in the personal finance
sense.
SAVINGS
 Define savings as refraining from consuming (after paying
taxes).
 The opportunity cost of saving: when people save,they give
up current consumption.
SO WHY SAVE?
 Why do people save, since they are giving up the opportunity
to consume now?
MORE DISCUSSION…
 People save in order to meet future needs.
 What are some different ways to save and invest?
 After looking at Activity 1, discuss the investment advice
given.
PRACTICE
 Which of the following statements BEST describes the
operation of banks?
A. Banks take in deposits, for which they pay a relatively small
rate of interest; they then hold a small amount aside and loan
out the rest at a higher rate of interest.
B. Banks borrow money from the government at low interest
rates, and they loan that money to customers at higher
interest rates.
C. Banks, under the license from the government, print money
that they then loan out to businesses and households.
D. Banks take in deposits, which they use to pay their employees
and other costs.
PRACTICE
Banks take in deposits, for which
they pay a relatively small rate of
interest; they then hold a small
amount aside and loan out the rest
at a higher rate of interest.
GROUP ACTIVITY
 Get into groups of 5.
 Get a copy of Activity 2.
 Teacher will read introductory paragraph.
 Each student will assume a role.
 Take a few minutes to practice.
 Then each student will read their parts to the group.
DECISION GRIDS
 As a class, discuss some advantages and disadvantages of the
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different investment options.
A good way to evaluate the options would be to use a decision
grid.
Students complete the grid in their groups.
Possible criteria include liquidity (ease of converting into cash),
ease of opening the account or making the investment, and ease of
understanding the investment.
The safety of the investment (lack of risk) is another important
criterion.
CLOSURE
 Each group to summarize their decision grids to the
class.
 What would your group decide, if they were in David’s
place? Understand that there is no one correct decision
for David; his choice depends on his goals and priorities.
 Students should think for themselves and seek additional
information before they act on any investment advice,
even from relatives.
EXIT TICKET
 In your JOURNALS, answer the following essential
questions:
 How would you create a savings or investment plan for a future
goal?
 How do services differ among the different financial
institutions?
HOMEWORK OPTIONS
 Research and write up other investment options. Report on
common investment fraud schemes, or the prospect of
“investing” in a lottery.
 Assume that you had invested $1,000 twenty years ago.
Research how various investments fared over the past twenty
years.