SAVING - Cabarrus County Schools / District Homepage
COURSEPersonal Finance 8726UNIT: DManaging and Protecting ResourcesESSENTIAL STANDARD:8.00C311%Apply procedures for managing personal finances.OBJECTIVE: 8.01B24%Understand options for saving and investing.ESSENTIAL QUESTIONS:How are saving and investing similar, and how are they different? Why do some people find it so difficult to save and invest?What “rules” can help build smart saving and investing habits?What factors should be considered when selecting saving and investing options?UNPACKED CONTENTSaving and investingSavingInvestingDefinitionSaving is setting aside present income for future use.Savings is the portion of income not spent on consumption.Investing is purchasing assets that earn interest over time.Investments are assets purchased with the goal of increasing income. Primary purposeTo make money available for future needsTo make a profit over timeReasons for saving and investingTo prepare for emergencies * To pay recurring expenses To prepare for major purchases * To prepare for future purchasesTo achieve financial goals * To prepare for retirementInterest earningsA bonus or side-benefitThe main focusReturnUsually earns lower rates of interestUsually earns higher rates of interestLiquidityMoney may be withdrawn at any timeMoney may not be easily accessibleVolatilityUsually not volatile; rates are fixedRate of return and value may change suddenly and significantlyRiskUsually little risk of losing moneyUsually more risk, but risks may be necessary to make a profitReasons individuals may fail to save/investNot being able to meet current needs and wantsNot being aware of how much needs to be saved for future goalsOver-relying on credit for emergenciesOver-relying on job security and insuranceOBJECTIVE: 8.01B24%Understand options for saving and investing.UNPACKED CONTENT“Rules” for saving and investingView saving and investing as a fixed expenseRule of Saving: Pay yourself first; take a portion of earnings for saving/investing before spending any of your paycheck70-20-10 Saving and Investing Rule: For any money earned, spend 70%, save 20%, and invest 10%Saving and Investing Plan: For those whose values or lifestyle make saving 30% unrealistic, start a saving and investing plan in order to continually save a fixed amountRule of 72: Divide 72 by the rate of interest earned on an investment to find the number of years needed to double an amount of money investedFactors to consider when choosing saving and investing optionsLiquidityMinimum deposit/balanceInterest rates/rate of returnRisk factors TransactionsSecuritySaving and investing optionsSavings accountsMoney market accountsCertificates of depositSavings bondsIndividual retirement accounts (IRAs)StocksBondsMutual fundsA Closer Look at Saving and Investing-15240078105Directions: Use this graphic organizer to take a closer look at saving and investing.00Directions: Use this graphic organizer to take a closer look at saving and investing.3200400127000INVESTINGPutting aside money for the primary purpose of earning interest over time00INVESTINGPutting aside money for the primary purpose of earning interest over time76200-194310SAVINGPutting aside money for the primary purpose of having money for future uses00SAVINGPutting aside money for the primary purpose of having money for future uses464820019367500990600193675001676400164465How are they alike?00How are they alike?68580031750_______________________________________________________________________________________________________________________________________________________________________________________________00_______________________________________________________________________________________________________________________________________________________________________________________________1066800136525004572000136525001676400136525How are they different?00How are they different?3048004445____________________________________________________________________________00____________________________________________________________________________32766004445____________________________________________________________________________00____________________________________________________________________________30480018415What role does each play in financial security?____________________________________________________________________________________________________________________________________________________________________________________________________00What role does each play in financial security?____________________________________________________________________________________________________________________________________________________________________________________________________Appendix 8.01B4648200-25146000Comparison: Saving and InvestingDirections: Use this chart to record information about saving and investing so you can compare the two practices.Criteria for ComparisonSavingInvestingDefinitionPrimary purposeReasons for . . .Interest earningsReturnLiquidityVolatilityRiskAppendix 8.01C4648200-25146000Comparison: Saving and Investing---KEYDirections: Use this chart to record information about saving and investing so you can compare the two practices.Criteria for ComparisonSavingInvestingDefinitionSaving is setting aside present income for future use.Savings is the portion of income not spent on consumption.Investing is putting money to work so that it earns interest over time.Investments are assets purchased with the goal of increasing income. Primary purposeTo make money available for future needsTo make a profit over timeReasons for . . .To prepare for emergencies * To pay recurring expenses To prepare for major purchases * To prepare for future purchasesTo achieve financial goals * To prepare for retirementInterest earningsA bonus or side-benefitThe main focusReturnUsually earns lower rates of interestUsually earns higher rates of interestLiquidityMoney may be withdrawn at any timeMoney may not be easily accessibleVolatilityUsually not volatile; rates are fixedRate of return and value may change suddenly and significantlyRiskUsually little risk of losing moneyUsually more risk; risks may be necessary to make a profit3962400-15240000Appendix 8.01D70-20-10Directions: See if you can do the math in your head to solve these problems using the 70-20-10 Saving and Investing Rule. Write your answer for each situation. Then use the space at the bottom of the page or a calculator to check your answers. If additional space is needed, use the back of this page.Josh earned $100 from mowing lawns during the month of July. How much should he save?How much should he spend?How much should he invest?Janet received $140 in gift money for her birthday. How much should she spend?Hal earned $25 today. How much should he invest?Mr. Jones inherited $50,000 from his great uncle. How much should he invest?Sarah won $100 from a raffle. How much should she save?Theo sold enough magazine subscriptions to earn a profit of $200. How much should she save? Now, compare the three amounts---70%, 20%, and 10%---to answer the following questions: Why do you think the percentage for spending is the largest amount of the three?8. Why do you think the percentage for saving is double that for investing? Can you think of times in life when the percentages for saving and investing might be higher? Why?0000Appendix 8.01E5181600-17526000Options for Saving and InvestingDirections: Use this chart to record information about options forsaving and investing.Savings AccountsMoney MarketCertificates of DepositSavings BondsDefinitionMinimumsWithdrawals and liquidityInterest ratesand rates of returnTransactionsSecurity and risk factorsAppendix 8.01E, continuedOptions for Saving and InvestingDirections: Use this chart to record information about options forsaving and investing.IRAStocksBondsMutual FundsDefinitionMinimumsWithdrawals and liquidityInterest ratesand rates of returnTransactionsSecurity and risk factorsAppendix 8.01H4876800-23685500 --- Key Terms: Saving and Investing OptionsTermDefinitionGeneral TermssaveTo set aside present income for future useinvestTo put money to work earning interest over timeprofitMoney remaining in a business after expenses are paidinterestMoney paid for the use of someone else’s money over a period of timereturnThe income that can be made on an investmentliquidityHow easily an asset can be converted into cashvolatilityHow easily the interest or cash value of an investment can changeriskThe possibility of earning or losing money from an investmenttransactionA saving/investing activity---e.g., deposits, withdrawals, and transfersSaving and Investing Optionssavings accountAn account in a bank/financial institution for saving, making deposits/withdrawalsmoney market A savings account in which deposits are invested to yield additional earningsCDA certificate of deposit stating money has been deposited for a specific timesavings bondA debt certificate issued by the U. S. Treasury that is not transferableIRAAn Individual Retirement Account used to save money for retirementKoegh planA tax-deferred retirement plan for self-employed people Roth IRAA personal savings plan; contributions are not tax-deductible; earnings are tax-freestockA share of ownership and interest in the assets and earnings of a companycommon stockStock in a public corporation; returns vary, but higher riskpreferred stockStock with fixed dividends, less riskblue chip stockStock from large companies, less riskgrowth stockStock from growing companies, more riskpenny stockStock that costs less than $1 per share; extremely high riskbondA certificate of debt given by a company or government that entitles the bondholder to the original amount plus interest paid by a set datemutual fundA group of investments held in common with shares owned by individual investors ................
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