Middle School Family & Consumer Sciences
This presentation is based on the standard for Middle School Financial
Literacy Domain 2: Students will apply management practices to
personal, family, and financial resources.
FCS-MS 2.2.4: Saving/Investing, and Insurance
Resource used:
Textbook: Life Skills for the 21st Century, S. Weixel, F. Wempen ,
Pearson, 2010 Edition.
Savings
Tevin Shoultz, Purdue University EDCI 360, Spring 2015
tshoultz@purdue.edu
What is savings?
▪ The portion of your current income not
spent and placed in a savings account.
Why do we save?
▪ In case of emergencies
▪ Traveling
▪ Buying a home and/or car
▪ Special Occasions
– Graduation
▪ Future Endeavors
– College
What are the best ways to save?
▪ Pay Yourself First!
– Placing a specific amount of money in a savings
account deposited in either a bank or credit union.
▪ Investments!
Pay Yourself First
▪ When an individual has a specific savings amount from each paycheck,
deposited into their savings account. Opening a savings account is the
most safest and most reliable way to save your money.
Types of savings accounts:
▪ 3 different types of savings accounts:
– Passbook Accounts: The most standard type of
savings account.
– Time Accounts: Savings accounts that require
you to leave your money untouched for a
certain amount of time.
▪ Certificate of Deposit (CDs)
– Money Markets: Offer a higher interest rate
than a passbook account. They have a higher
minimum balance, and limit the number of
times per month withdrawals can be made.
NOTE: Your savings
is insured by the
FDIC. That means is
something happens
to the bank, then
government will
reimburse you that
money.
What is interest?
▪ Money you can earn for
opening a savings
account at a bank/credit
union.
– Simple interest
– Compound interest
▪ Think of interest as free
money from your bank.
Example:
– In August of her senior year, Lori started working at the local
grocery store. With working 20 hours a week and makes $8.00
an hour. She brings home roughly $130, after taxes. Lori is
saving all the money she can before she leaves for college in
August. After deep thought, she figured out that she could save
$80 a week and have it deposited directly into her savings
account.
After saving for 12 months (52 weeks), Lori saved $4160, before
earning interest from her bank.
Now to figure earnings from interest
▪ Most accounts you might have earn simple interest.
– Lori’s bank gave her an interest rate of 3%. Since she saved for 1
year, we can figure out how much interest she could earn after 1
year.
–We follow the simple formula:
▪ Simple Interest= Principal x interest x time
–Plug & chug the relevant information!
▪ Simple Interest = $4160 x .03 x 1= 124.80
Interest continued…
▪ Suppose Layton had received money from his Sweet 16 birthday
party. He had gotten a total of $500. He decided to put the money
into a savings account earning simple interest, until he was 18. The
savings account earned him 2% interest. What is the value of the
account on his 18th birthday?
▪ What do we do?
1.
2.
3.
4.
5.
Pull out the important information! “Plug and chug” along into the formula.
SI=Principal x Interest x Time
SI=500 x .02 x 2
Interest = $20.00
Total: $520.00
Another way to grow your money is through investing.
You can do this by investing a portion of your savings to
grow your ROI—return on investment.
It’s a lot more risky, but can be a great way to grow your
money for the future.
Investing is a gamble. It is not insured. Be prepared to
lose money sometime/somehow when investing.
▪ Two basic types of investments are:
1.
2.
Equity Investments
Fixed Income Investments
The type of equity investments available to investors are buying stock
in a company. Stock is a form of ownership in a company, but you don’t
have any owner’s rights to the company.
If the company’s stock price rises and you’re invested in it, then you’ve
made money!
One of the hardest decisions is to decide to keep the stock and gamble
to make more money, or risk losing it.
Market Watch Example!
So what do the numbers mean?
▪ AAPL- Apple
– 4 shares purchased at $127.39
– 6 shares purchased at $128.13
– After opening of the market day, I had
earned $1.06 per share.
I can chose to sell the stocks at any time, or
I can play a gamble and hope to have a
better return on my investment.
▪ Apple’s stock went down to
$126.85
– This shows how earnings can
fluctuate on a daily basis.
– Investing in the stock market is a
gamble, but a great way to build up
financial capital and a higher return
on investment.
▪ BioTime-BTX
– There was a gain from $5.51 to $5.76.
– .25 cent gain, for 15 shares earning
$3.75 today.
▪ You are lending your money to a
business/government agency in place for a bond.
– Bonds are securities that provide fixed interest
payments for a set period of time.
– The company is making a vow that they will pay you
interest during your period of time. Once the maturity
date has been reached you will be paid back your
principal.
– So why do it?
▪ It’s much safer!!!
– You are guaranteed a return and most bonds are insured.
▪ A pool of money that has been collected from a
group of many investors.
– They use the money to buy stocks, bonds, & other types
of securities.
– Investments in many companies, building a better return!
• Easy to create liquidity.
• You can sell your shares at
anytime!
• A professional is doing the
investing for you!