Save

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Why Save &Why Save &
Invest?Invest?
Key concepts to prepare for yourKey concepts to prepare for your
future!future!

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The best way to achieve financial success is to plan forThe best way to achieve financial success is to plan for
it. Do you want to someday…it. Do you want to someday…
 Buy a car?Buy a car?
 Graduate from college?Graduate from college?
 Own your own home?Own your own home?
 Live comfortably inLive comfortably in
retirement?retirement?

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When should you startWhen should you start
investing????investing????
 The younger the better. This way youThe younger the better. This way you
can take advantage of compoundcan take advantage of compound
interest.interest.
 Think about using your birthday moneyThink about using your birthday money
as a great starting amount!as a great starting amount!

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Compound Interest is…Compound Interest is…
 The interest that you EARN on interest. WOW so your money is making moneyThe interest that you EARN on interest. WOW so your money is making money
and then that money makes even more for you- how cool is that???and then that money makes even more for you- how cool is that???
 Example: I you have $100 and it earns 5% compounded yearly you’ll have $105 atExample: I you have $100 and it earns 5% compounded yearly you’ll have $105 at
the end of one year. BUT at the end of the second year you’ll have $110.25.the end of one year. BUT at the end of the second year you’ll have $110.25.
 You earned $5 on the initial $100 deposit plus an extra $.25 on the $5 in interest.You earned $5 on the initial $100 deposit plus an extra $.25 on the $5 in interest.
Twenty-five cents may not sound like a lot, but it adds up over time. Even if youTwenty-five cents may not sound like a lot, but it adds up over time. Even if you
NEVER add another dime to that account, in 10 years you’ll have over $162NEVER add another dime to that account, in 10 years you’ll have over $162
through the power of compound interest and in 25 years you would have almostthrough the power of compound interest and in 25 years you would have almost
$340!$340!

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Rule of 72…estimating how yourRule of 72…estimating how your
investment will grow over timeinvestment will grow over time
 The Rule of 72 can tell you approximately how long itThe Rule of 72 can tell you approximately how long it
will take for your investment to double in value.will take for your investment to double in value.
 Simple the divide the number 72 by your investment’sSimple the divide the number 72 by your investment’s
expected rate of return (ignoring the percent sign).expected rate of return (ignoring the percent sign).
Assuming an expected rate of return of 9 percent, yourAssuming an expected rate of return of 9 percent, your
investment will double in value about every 8 years.investment will double in value about every 8 years.
(72 divided by 9 equals 8).(72 divided by 9 equals 8).

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How much does that pizza sliceHow much does that pizza slice
every week really cost you????every week really cost you????
 If you spend $2 a week on slice of pizza andIf you spend $2 a week on slice of pizza and
you buy 1 slice each week until you are readyyou buy 1 slice each week until you are ready
to retire you will spend $5200 onto retire you will spend $5200 on pizzapizza..
HOWEVER…HOWEVER…
 IF you give up that slice of pizza and invest theIF you give up that slice of pizza and invest the
money instead earning 8% compoundedmoney instead earning 8% compounded
annually every year for 50 years, you’ll haveannually every year for 50 years, you’ll have
over $64,678.87!over $64,678.87!

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How can I Save & Invest?How can I Save & Invest?
 Pay yourself first. Set up a budget and include yourself inPay yourself first. Set up a budget and include yourself in
the things you have to pay…the things you have to pay…
 Example: Savings, Cell Phone, Car payment/gas, etc…Example: Savings, Cell Phone, Car payment/gas, etc…
 Don’t just take what you have left over, plan to your savingsDon’t just take what you have left over, plan to your savings
as one of your expenses.as one of your expenses.

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Different Ways to Save &Different Ways to Save &
Invest:Invest:
 Savings AccountsSavings Accounts
If you save your money in a savings account, the bank or credit unionIf you save your money in a savings account, the bank or credit union
will pay you interest, and you can easily get your money whenever youwill pay you interest, and you can easily get your money whenever you
want it. At most banks, your savings account will be insured by thewant it. At most banks, your savings account will be insured by the
Federal Deposit Insurance Corporation (FDIC).Federal Deposit Insurance Corporation (FDIC). Typically SavingsTypically Savings
Accounts do not offer a high interest rateAccounts do not offer a high interest rate..
 Insured Bank Money MarketsInsured Bank Money Markets
These accounts tend to offer higher interest rates than savings accounts and oftenThese accounts tend to offer higher interest rates than savings accounts and often
give you check-writing privileges. Like savings account, many money marketgive you check-writing privileges. Like savings account, many money market
accounts will be insured by the FDIC. Note that bank money market accounts areaccounts will be insured by the FDIC. Note that bank money market accounts are
not the same as money market mutual funds, which are not insured by the FDICnot the same as money market mutual funds, which are not insured by the FDIC

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Certificates of DepositCertificates of Deposit
You can earn an even higher interest if you put your money in aYou can earn an even higher interest if you put your money in a
certificate of deposit, or CD, which is also protected by the FDIC.certificate of deposit, or CD, which is also protected by the FDIC.
When you buy a CD, you promise that you're going to keep yourWhen you buy a CD, you promise that you're going to keep your
money in the bank for a certain amount of time. If you withdrawmoney in the bank for a certain amount of time. If you withdraw
too early you will be financially penalized.too early you will be financially penalized.
StocksStocks
Have you ever thought that you'd like to own part of a famous restaurant,Have you ever thought that you'd like to own part of a famous restaurant,
or the company that makes the shoes on your feet? That's what happensor the company that makes the shoes on your feet? That's what happens
when you buy stock in a company-you become one of the owners. Yourwhen you buy stock in a company-you become one of the owners. Your
share of the company depends on how many shares of the company'sshare of the company depends on how many shares of the company's
stock you own.stock you own.

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Government BondsGovernment Bonds
In general, fixed-income securities areIn general, fixed-income securities are
classified according to the length of timeclassified according to the length of time
before maturity. These are the three mainbefore maturity. These are the three main
categories:categories:
Bills -Bills - debt securities maturing in less thandebt securities maturing in less than
one year.one year.
Notes -Notes - debt securities maturing in one todebt securities maturing in one to
10 years.10 years.
Bonds -Bonds - debt securities maturing in moredebt securities maturing in more
than 10 years.than 10 years.
Debt issued by Uncle Sam is regarded asDebt issued by Uncle Sam is regarded as
extremely safe, as is the debt of any stableextremely safe, as is the debt of any stable
country. The debt of many developingcountry. The debt of many developing
countries, however, does carry substantialcountries, however, does carry substantial
risk. Like companies, countries canrisk. Like companies, countries can defaultdefault
on payments.on payments.
Municipal Bonds:
Known as "munis", are the next
progression in terms of risk.
Cities don't go bankrupt that often, but
it can happen.
The major advantage is that the returns
are free from federal tax. Some
municipal bonds completely tax free.
Because of these tax savings, the yield
on a muni is usually lower than that of a
taxable bond. Depending on your
personal situation, a muni can be a great
investment on an after-tax basis.
BONDS

CORPORATECORPORATE BONDSBONDS
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CORPORATE BONDS: A company can issue bonds just as it
can issue stock. Large corporations have a lot of flexibility as to
how much debt they can issue: the limit is whatever the market
will bear. Generally, a short-term corporate bond is less than five
years; intermediate is five to 12 years, and long term is over 12
years. These bonds help a company grow and they promise to
pay you interest and to return your money on a date in the future.
Corporate bonds are characterized by higher yields because there
is a higher risk of a company defaulting than a government. The
upside is that they can also be the most rewarding fixed-income
investments because of the risk the investor must take on. The
company's credit quality is very important: the higher the
quality, the lower the interest rate the investor receives.

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Mutual Funds.Mutual Funds.
Stocks and bonds can be purchasedStocks and bonds can be purchased
individually, or you can buy themindividually, or you can buy them
by buying shares of a mutual fund.by buying shares of a mutual fund.
A mutual fund is a pool of moneyA mutual fund is a pool of money
run by a professional or group ofrun by a professional or group of
professionals who have experienceprofessionals who have experience
in picking investmentsin picking investments..
After researching many companies,After researching many companies,
these professionals select thethese professionals select the
stocks or bonds of companies andstocks or bonds of companies and
put them into a fund. Investors canput them into a fund. Investors can
buy shares of the fund, and theirbuy shares of the fund, and their
shares rise or fall in value as theshares rise or fall in value as the
values of the stocks and bonds invalues of the stocks and bonds in
the fund rise and fall.the fund rise and fall.

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Risk & ReturnRisk & Return
 Every saving or investing product has itsEvery saving or investing product has its
advantages and disadvantages.advantages and disadvantages.
Differences include how fast you can getDifferences include how fast you can get
your money when you need it, how fastyour money when you need it, how fast
your money will grow, and how safe youryour money will grow, and how safe your
money will be.money will be.

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Savings Accounts, Insured Money Market Accounts, &Savings Accounts, Insured Money Market Accounts, &
CDsCDs
 Tends to be very safe.Tends to be very safe.
 Federally insured.Federally insured.
 Can easily access your money.Can easily access your money.
 Because of the low risk and the availability your moneyBecause of the low risk and the availability your money
earns a lower interest rate and has a lower return.earns a lower interest rate and has a lower return.

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STOCKSSTOCKS
 Highest average rate ofHighest average rate of
return.return.
 NO guarantee of profits.NO guarantee of profits.
 If the company doesn’t doIf the company doesn’t do
well you could LOSE allwell you could LOSE all
your money.your money.
You Can Make Money fromYou Can Make Money from
Stocks Two Ways:Stocks Two Ways:
1. Company does well and1. Company does well and
other investors want to buyother investors want to buy
stock and the price goes up.stock and the price goes up.
You bought it at $10 it nowYou bought it at $10 it now
sells for $12. The $2 gain issells for $12. The $2 gain is
called a Capital Gain ofcalled a Capital Gain of
Appreciation.Appreciation.
2. If the company makes a profit2. If the company makes a profit
it could pay a dividend toit could pay a dividend to
stockholders. Sometimesstockholders. Sometimes
instead of paying a dividendinstead of paying a dividend
the company keeps thethe company keeps the
money and uses it to expandmoney and uses it to expand

1616
Stocks continued…Stocks continued…
 Buying stock in a brand new company is risky because if itBuying stock in a brand new company is risky because if it
goes out of business you lose everything.goes out of business you lose everything.
 The key to buying stock is learning as much as you canThe key to buying stock is learning as much as you can
about the company to determine if it will be successfulabout the company to determine if it will be successful..
 The greater the return the greater the risk. If you are too safeThe greater the return the greater the risk. If you are too safe
you may not earn much, if you are too risky you could loseyou may not earn much, if you are too risky you could lose
everything.everything.

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DIVERSIFYDIVERSIFY investments!investments!
 To decrease your risk in investmentsTo decrease your risk in investments
you need to DIVERSIFY thoseyou need to DIVERSIFY those
investments.investments.
 It's common sense: don't put allIt's common sense: don't put all
your eggs in one basket. If you buyyour eggs in one basket. If you buy
a mixture of different types ofa mixture of different types of
stocks, bonds, or mutual funds, yourstocks, bonds, or mutual funds, your
savings will not be wiped out if onesavings will not be wiped out if one
of your investments fails.of your investments fails.
 Diversification helps you to protectDiversification helps you to protect
your savings. If you had just oneyour savings. If you had just one
investment and it went down ininvestment and it went down in
value, then you would lose money.value, then you would lose money.
But if you had ten differentBut if you had ten different
investments and one went down ininvestments and one went down in
value, you could still come outvalue, you could still come out
ahead.ahead.

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Steps to Achieving FinancialSteps to Achieving Financial
SecuritySecurity
CREDIT CARDSCREDIT CARDS
 Manage your creditManage your credit
cards- don’t chargecards- don’t charge
items if you can’t afforditems if you can’t afford
to pay them off quickly.to pay them off quickly.
 Always know how muchAlways know how much
interest your credit cardinterest your credit card
is charging you. Pay offis charging you. Pay off
the ones with the highestthe ones with the highest
interest rate first.interest rate first.
 Always pay more thanAlways pay more than
the minimum balance.the minimum balance.

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Steps toSteps to AchievingAchieving Financial SecurityFinancial Security
 Make a plan. Set financial goals.Make a plan. Set financial goals.
Be realistic.Be realistic.
 Keep Trade-Offs andKeep Trade-Offs and
Opportunity Cost in mind. ThisOpportunity Cost in mind. This
means that you are going to havemeans that you are going to have
to consider giving up someto consider giving up some
things in order to havethings in order to have
something else later on.something else later on.
 Save & Invest for the long term.Save & Invest for the long term.
Investing is not for the faint ofInvesting is not for the faint of
heart. You have to ride out theheart. You have to ride out the
ups and downs of the market.ups and downs of the market.
Those who are the mostThose who are the most
successful are the ones that “buysuccessful are the ones that “buy
and hold”.and hold”.
 Investigate before you invest. DoInvestigate before you invest. Do
your homework and use ayour homework and use a
variety of sources to check out avariety of sources to check out a
company.company.

2020
TheThe time is now!time is now!
START SAVING AND INVESTING NOW.START SAVING AND INVESTING NOW.
DO NOT WAIT. THE SOONER YOU START THEDO NOT WAIT. THE SOONER YOU START THE
MORE MONEY YOU WILL HAVE WHEN YOUMORE MONEY YOU WILL HAVE WHEN YOU
RETIRERETIRE..

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