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Savings vs. Savings vs. Investing Investing

Savings vs. Investing

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Savings vs. Investing. Savings. Savings is the portion of current income not spent on consumption. Investments. Investing is the purchase of assets with the goal of increasing future income. Risk, Return, and Liquidity. Risk The chance that the value of an investment will decrease. Return - PowerPoint PPT Presentation

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Page 1: Savings vs. Investing

Savings vs. Savings vs. InvestingInvesting

Page 2: Savings vs. Investing

SavingsSavings

Investing is the purchase of assets with the goal of increasing future income.

Savings is the portion of current income not spent on consumption.

InvestmentsInvestments

Page 3: Savings vs. Investing

Risk, Return, and LiquidityRisk, Return, and Liquidity

RiskRisk The chance that the value of an The chance that the value of an

investment will decrease.investment will decrease. ReturnReturn

The profit or yield from an investment.The profit or yield from an investment. LiquidityLiquidity

The ability of an investment to be The ability of an investment to be converted into cash quickly without converted into cash quickly without loss of value.loss of value.

Page 4: Savings vs. Investing

Risk, Return, and LiquidityRisk, Return, and Liquidity

SavingsSavings Low riskLow risk Low returnLow return High liquidityHigh liquidity

InvestmentsInvestments High riskHigh risk High returnHigh return Low liquidityLow liquidity

Page 5: Savings vs. Investing

Inflation, Savings and Inflation, Savings and InvestmentsInvestments

Today, a large soft drink at your favorite fast-food place costs $1.00. You buy the soft drink but

also decide to save some money for the future as well. So you put a dollar in your savings account,

where it earns 5%.NEFE

Page 6: Savings vs. Investing

Inflation, Savings and Inflation, Savings and InvestmentsInvestments

One year later, the dollar in your saving account is worth $1.05. You take the money out and visit

your favorite convenience store,

hoping to buy another delicious beverage. Unfortunately, drinks

now cost $1.10.NEFE

Page 7: Savings vs. Investing

Inflation, Savings and Inflation, Savings and InvestmentsInvestments

The point? Inflation can work against your

money. You need to learn to invest wisely,

follow the rate of inflation, and make sure your investment rates

are higher than those of inflation.

Page 8: Savings vs. Investing

Time Value of MoneyTime Value of Money

The time value of money refers to the The time value of money refers to the fact that a dollar in hand today is fact that a dollar in hand today is worth more than a dollar promised at worth more than a dollar promised at some future time. some future time.

Page 9: Savings vs. Investing

Future ValueFuture Value

Refers to the amount of money to which Refers to the amount of money to which an investment will grow over a finite period an investment will grow over a finite period of time at a given interest rate. of time at a given interest rate.

Put another way, future value is the cash Put another way, future value is the cash value of an investment at a particular time value of an investment at a particular time in the future.in the future.

Page 10: Savings vs. Investing

““You can always You can always makemake

more money, more money, but you can’t makebut you can’t make

more time.”more time.”

Respond to this statement on Respond to this statement on your guided notes and then your guided notes and then discuss it with a partner. discuss it with a partner. How does it relate to future How does it relate to future value?value?

Page 11: Savings vs. Investing

Time Value of MoneyTime Value of Money

Picture from NEFE

Page 12: Savings vs. Investing

Risk and ReturnRisk and Return

What is the relationship between What is the relationship between risk and return?risk and return?

Page 13: Savings vs. Investing
Page 14: Savings vs. Investing

Which financial product is Which financial product is appropriate for the appropriate for the

following situations?following situations? Saving for a senior tripSaving for a senior trip Saving for a down payment on a Saving for a down payment on a

househouse Saving for retirementSaving for retirement

Page 15: Savings vs. Investing

NEFE Teacher Guide

Page 16: Savings vs. Investing

Sample Student Work

Page 17: Savings vs. Investing

Sample Student Work

Page 18: Savings vs. Investing