To Save or Not to Save
Securities and Investments
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Saving is …
• A means of reaching short-term (typically oneyear or less) financial goals
• Synonymous with “Pay Yourself First”
– Treating your savings as an expense by
paying yourself an amount on a regular basis
to go toward savings
• Easy to get to in the event of an emergency
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Common Savings Instruments
 Safe
places for your money, usually short-term,
lower interest rates, easily accessible (liquid)
Savings
accounts
Money
market
accounts
(MMAs)
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Certificates
of deposits
(CDs)
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Investing is …
• not the same as “saving”
• designed to meet long-term (typically longer
than one year) financial goals
• more risky than a regular savings account
• potential for higher returns on your money
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Common Investment Instruments
•Riskier places to put your money (no guarantees of
rates), long-term in order to see higher returns, not as
easily accessible (not as liquid)
Real estate
U.S. Treasury
Securitiesnotes and bills
Individual
stocks
Government
bonds
Mutual funds
Corporate
bonds
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Benefits to Investing
Financial security for
many years
Time can be an asset.
The rate of return can be
greater than the inflation
rate.
Can become a part
owner of a company
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SMART Goals
Specific-what you would like to achieve, i. e., a
specific vacation destination
Measurable-a total amount of money to be
saved for the vacation
Attainable-how the plan to achieve the goal is
possible, i.e., a general breakdown of vacation
expenses
Realistic-a reasonable plan or breakdown of
exactly how to save the money, i.e., $50 per
week for 20 weeks
Time Bound-a specific date for the goal to be
accomplished, i.e., by February 1st as opposed
to spring
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SMART Goal Example
Specific-I want to save money each week by not
getting coffee each morning.
Measurable-I will save $10.00 each week by giving
up my coffees.
Attainable-I can save $10.00 each week , or $40.00
per month.
Realistic-I can save $10.00 each week, or $40.00 per
month, for 6 months, for a total of at least $240.00.
Time Bound-I can continue this pattern of saving for
an additional 6 months so I can save at least $480.00
at the end of the year that I can put toward a computer.
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Simple vs. Compound Interest
• Simple interest example:
– $100 x 5% (the interest rate) = $5
– Compare to a snowball dropped from a high point such
as a roof. There is snow added to the snowball but it
does not get any larger.
• Compound interest example:
– $100 x 5% = $5 for a total of $105
– Now, $105 x 5% = $5.25 for a new total of $110.25
– also known as “interest on interest”
– Compare to a snowball rolling down a hill. Snow
accumulates on top of the snow already in the snowball
and it continues to grow.
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Time Value of Money
• The time value of money is the concept that
money is worth more now if it is invested than
if it is invested later.
• This is because time is on your side; the earlier
money is invested, it has more time to “grow”.
• The value of money now is called “Present
Value” while the value of money later is called
“Future Value”.
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“Rule of 72” Explained
• Shows how compounding can increase your
money at a more rapid rate than simple interest
• A formula which calculates how long it will
take your initial investment to double
• For example, here is the formula if you
anticipate a 6% interest rate:
– Take 72 and divide by 6 to determine the
number of years it will take to double your
investment.
–
72 / 6 = 12 years
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Formal Assessments
• SMART Goal Assignment #1 : Decide on a financial goal you
would like to achieve. Create a SMART goal explaining each
component of the SMART acronym. Include an appropriate
graphic or diagram to enhance this word-processing document.
• Basic Savings Chart Assignment #2 – Students will conduct
online research to discover interest rates for at least three different
types of accounts at three different financial institutions. They
may create a table in a word-processing program or on a
posterboard.
• Saving vs. Investing Comic Strip Assignment #3 – Students will
use either an online comic strip creator program or posterboard to
create a comic strip depicting a conversation among individuals
where one is telling the other one the differences between saving
and investing, listening to the goals of the other character, and
then recommending to that character which actions to take with
his or her money.
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