Saving and Investing

1. Saving and Investing

2. Saving is important to meeting financialgoals • Best way is to save a fixed amount from every check- have it automatically deposited in savings • Be sure to have concrete (SMART) goals for the saving to avoid impulse spending • Saving in accounts protects your money and allows you to earn interest on the savings

3. Types of Savings • Savings account: • Earn low interest on principal • Financial institutions loan the money to others • Checking account: • Money for purchases • Must keep careful records • Debit cards allow paperless money transfer

4. Types of Savings (continued) • Money Market: • Requires higher minimum balance • Many allow check writing (limited) • Higher interest rates than savings accounts • Certificates of Deposit (CD): • Must be left in for a set amount of time • Higher rates of return

5. Investing • Investing in stocks and bonds leads to higher returns than other savings • Stocks: • Shares provide partial ownership in a company • Price of share goes up/down based on company performance

6. Investing (continued) • Bonds: • Loans money to company or government • Pays set rate of interest over several years • US government bonds are a very safe investment • Mutual Funds: • Pools money to invest in different stocks and bonds • Chosen by financial experts • Less risk than investment in individual stocks

7. Commo- dities Penny Stock Speculative Stock / Bonds / Mutual Funds Collectibles Blue-Chip Common Stock Growth Mutual Funds Real Estate Balanced Mutual Funds High-Grade Preferred Stock High-Grade Convertible Bonds High-Grade Municipal Bonds or Mutual Funds Money Market Accounts or Mutual Funds High-Grade Corporate Bonds or Mutual Funds Insured Savings / Checking Accounts U.S. Savings Bonds Certificates of Deposit Treasury Issues FinancialPlanningPyramid Highest Risk Highest Earnings Lower Risk Lower Earnings