Saving and Investing
Unit 1
Lesson 5
 People work hard to increase their take-home
pay, but often they don’t take time to plan and
use their money wisely. Smart money
management means carefully planning for its
use today as well as in the years to come,
either through saving or long-term investing.
 For many young adults, the opportunity cost
of starting a savings program with a small
income seems challenging. And, for those
who choose to save, the number of options
available can be overwhelming. This lesson
will clear up some of the confusion by
introducing various methods of saving, such
as savings accounts, stocks, and mutual
 This lesson focuses on PYF – Planning your
future. At Finance Park, students will be
required to save and track investments. PYF
shows students how long-term investing can
fund future needs and wants, such as
automobiles, housing, college, and
Key Terms
 Budget
An itemized summary of probable expenditures
and income for a given period.
 Opportunity Cost
The next best alternative given up when making a
 Invest
To commit money in order to gain a profit or
Key Terms
 Mutual Fund
A business that pools people’s money for
investment in stocks or bonds of various
 Savings Account
An interest-bearing account where people put
money aside for future use.
 Stock
A share of a corporation sold to the public.
Planning Your
 The pie chart
shows typical
categories in a
 It is extremely
important that
everyone uses a
Planning Your Future
 To spend your money wisely, it is important to
create and follow a monthly budget. Also
important to smart spending is planning for the
 You will be more successful in saving, investing,
and budgeting if you know what you want your
money to do for you. What are your goals? Do
you want to save money for something you need
or something that you want? Do you plan to use
your money soon or to spend it sometime in the
Planning Your Future
 Following a budget for everyday expenses is
essential to spending your hard-earned money
wisely. Including saving and investing in your
budget helps to ensure you’ll meet your goals.
The key to success is careful planning and
sticking to that plan.
 The first step to achieving your goals is to define
them. Answering the following questions may
prove helpful in developing a smart plan and
ultimately reaching your goals.
Planning Your Future
 What are your goals? Do you want a new bike or
a car? Do you want to live on your own
someday? Do you want to go to college? It is
essential that you clearly define your goals to
understand what you are planning.
 How much money will you need to achieve your
goals? Are your goals attainable?
 When will you need the money? Will you need
some right away or perhaps several years in the
future? Knowing when you plan to use the
money will help you determine how you will
need to raise it.
Planning Your Future
 One you have answered the questions, you are
ready to create your saving and/or investing
 Did you find that you need the money soon? If
so, a savings account may need to be part of
your plan. Putting money into a savings account
is a safe way to save money and earn a modest
interest rate. You have quick access to your
money in a savings account.
Planning Your Future
 Are you saving for college or furnishings for your apartment
someday? If so, investing your money for the longer term may
be an option. Stocks and mutual funds allow you to invest your
money and earn, over time, a higher rate or return than money
placed in a savings account. Stocks and mutual funds are not
as safe as your savings account; the money you put into these
investments is not insured like your money in the savings
account. You can lose part or all of the money you invest.
However, stocks and mutual funds can pay you a greater return
on your investment than the interest earned on your savings
account. If you can wait to use the money and take the risk of
investing, stocks or mutual finds may be the option for you.
 Identifying your goals, understanding the best way to reach
your goals, creating a plan, and staying with your plan are
essential steps to ultimately getting what you want out of your
Writing Assignment
 Page 23
Determine a goal, research its cost, and
create the best plan for raising the money
necessary to reach it.
 Page 37
Complete the Word Map.
Time Is On Your Side
 The larger the amount of money you save regularly, the
more savings you will have at the end of the time period.
 The higher the interest rate you are paid, the more
savings you will have at the end of the time period.
 The more time you have to save, the more savings you
will have at the end of the time period.
 The more you increase the amount,
interest, or time the greater your savings.
Page 24
Time Is On Your Side
1.) If you saved $14 per week at 5% interest, how much
will you have at the end of 10 years?
2A.) If you saved $19.20 per week for five years at 5%
interest, how much will you have?
2B.) After 20 years?
3A.) If you saved $19.20 per week for five years at 10%
interest, how much will you have?
3B.) After 20 years?
4.) Describe a wise savings plan in terms of the three
critical variables of amount, interest, and time.
Page 24
Time Means Money
 If you saved $19.20 a week:
At 7% interest for 10 years, you would save:
At 9% interest for 15 years, you would save:
At 8% interest for 5 years, you would save:
At 6% interest for 20 years, you would save:
At 9% interest for 20 years, you would save: