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 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

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?

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

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.

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

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

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

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

C. Time deposits (Certificate of Deposit = CD) Money deposit at a financial institution that cannot be withdrawn for a certain “term” – or period of time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

Certificates of Deposit

Certificates of DepositProvide 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

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.

•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.

•"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.

•The not-for-profit financial institutions,

•which offer everything from savings accounts to automobile loans,

•are attractive to consumers because they offer competitive rates on 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

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.

•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).

•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).

Who protects my accounts?

FDIC Federal Deposit Insurance CorporationFor most banks

NCUA National Credit Union Adminsitration For Credit Unions