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Unit 6: Savings and Investment

Unit 6: Savings and Investment. Big Ideas Saving and investing strategies help individuals achieve …….? personal financial goals Saving and investing help to build wealth. Overview Ideas. I. Building wealth

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Unit 6: Savings and Investment

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  1. Unit 6: Savings and Investment • Big Ideas • Saving and investing strategies help individuals achieve …….? • personal financial goals • Saving and investing help to build wealth

  2. Overview Ideas • I. Building wealth A. Used as a means for preparing for planned and/or unexpected expenses (short term / long term) • Planned Expenses – ex’s? • budgets, retirement, college, house, car, etc. • Based on short and long term budget goals • Unplanned Expenses – ex’s? • Medical emergencies, accidents/disasters

  3. B. Obtaining financial security – what does this mean to you? • Not having to “worry” about money • Being financially stable- what does this mean to you?

  4. What Financial Security is NOT • Financial security isn’t making or having a certain amount of money. • There are many people who have made millions of dollars who are not financially secure. • isn’t limited to being independently wealthy

  5. So what is it? • a broader definition: • one that puts financial security within the reach of anybody with a desire to improve their financial situation, and a little bit of discipline.

  6. 4 Keys to Financial Security/Stability 1. Debt Free 2. In control of your expenses • (income > expenses) 3. increasing your savings/assets/net worth on a monthly basis 4. Not being forced to work at a job you dislike just to pay the bills

  7. II. Savings : (To build wealth) What are your options for savings?

  8. II. Savings: A. Passbook savings accounts • Traditional savings account – individual puts money into account; bank may provide interest payments on a 30 day cycle • Information is tracked in the “passbook” – a register of deposits and withdrawals

  9. B. Money-market accounts • Deposit account offered by a bank, which invests in government and corporate securities/stocks and pays the depositor interest based on the current interest rate • Typically: high rate of interest, but also high level of investment

  10. C. Time deposits (Certificate of Deposit = CD) • Money deposit at a financial institution that cannot be withdrawn for a certain “term” – or period of time • Typically: the longer the term, the higher the yield

  11. Certificates of Deposit

  12. Certificates of Deposit Provide a guaranteed return on your investment Interest Rates vary based on : $ amt. ; time; econ. Conditions A secure way to save money and increase wealth Must wait until the term limit is up to “cash out” the CD

  13. Banks vs. Credit Unions : Do you know the difference? • As soon as you deposit funds into a credit union account, you become a partial owner • and participate in the union's profitability. • Credit unions are formed by large corporations and organizations for their employees and members.

  14. Unlike banks that are open to anyone, laws require credit unions to have a defined field of membership • which means you'll have to be a member of that group to access the credit union and its services. • The field of membership can be broad, including an employer, church, school, community and employee group.

  15. "Out of the 8,000 credit unions, almost 25 percent are community-based • Churchgoers are eligible to join their church's credit union • as are students and faculty of a college and university.

  16. The not-for-profit financial institutions, • which offer everything from savings accounts to automobile loans, • are attractive to consumers because they offer competitive rateson loans and have money to put to work. • Credit unions have enjoyed a nice spurt in growth since the financial crisis and are flush with cash and want to make loans

  17. What’s the difference between a Savings account and a Checking (Debit) Account? • Savings Accounts: • Primary purpose is to ……? • save money (for emergency, for future purchases, or to invest). • Number of withdrawals per month is limited (6 or less). • Typically pays a higher interest rate than an interest-bearing checking account. • May require a minimum balance to avoid fees. • May charge fees for too many withdrawals.

  18. Checking / Debit Accounts: • Primary purpose is for….. • everyday money transactions such as paying bills and making purchases. • Few or no restrictions on the number of withdrawals or checks per month (some checking accounts offer a limited number of “free” checks per month and then charge a fee if more checks are written).

  19. May pay interest, with some accounts paying higher interest rates as your balance increases. • Usually charges a monthly maintenance fee (which may be waived under certain circumstances, such as maintaining a minimum daily or monthly balance, or if the account is linked to a savings account in the same institution).

  20. Who protects my accounts? FDIC Federal Deposit Insurance Corporation For most banks NCUA National Credit Union Adminsitration For Credit Unions

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