NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You Unit...
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Unit 3 - Investing: Unit 3 - Investing: Making Money Work for YouMaking Money Work for You
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
3-A
Savings and InvestmentsSavings and Investments
UniqueUniqueSavingsSavingsFeaturesFeatures
UniqueUniqueInvestmentInvestment
FeaturesFeatures
CommonCommonFeaturesFeatures
What are some features common to both What are some features common to both investments and savings?investments and savings?
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Investing Weekly at 5% InterestInvesting Weekly at 5% Interest
3-B
Amount SavedAmount SavedPer WeekPer Week
Value AfterValue After10 Years10 Years
$ 7.00$ 7.00
$ 14.00$ 14.00
$ 21.00$ 21.00
$ 28.00$ 28.00
$ 35.00$ 35.00
$ 4,720$ 4,720
$ 9,440$ 9,440
$ 14,160$ 14,160
$ 18,880$ 18,880
$ 23,600$ 23,600
1
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Investing Annually to Achieve a GoalInvesting Annually to Achieve a Goal
3-C
Value of $20Value of $20 1 Year1 Year 2 Years2 Years 4 Years4 Years 6 Years6 Years
4%4%
5%5%
6%6%
8%8%
10%10%
$20.80$20.80
$21.00$21.00
$21.20$21.20
$21.60$21.60
$22.00$22.00
$21.63$21.63
$22.05$22.05
$22.47$22.47
$23.33$23.33
$24.20$24.20
$23.40$23.40
$24.31$24.31
$25.25$25.25
$27.21$27.21
$29.28$29.28
$25.31$25.31
$26.80$26.80
$28.37$28.37
$31.74$31.74
$35.43$35.43
54321
Building….Building….
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Investing $1,000 AnnuallyInvesting $1,000 Annually
3-F
11%11%
10%10%
9%9%
8%8%
7%7%
6%6%
5%5%
12%12%
InterestInterestRateRate
55YearsYears
2020YearsYears
1515YearsYears
1010YearsYears
$5,526$5,526
$6,353$6,353
$6,228$6,228
$6,105$6,105
$5,985$5,985
$5,867$5,867
$5,751$5,751
$5,637$5,637
$12,578$12,578
$17,549$17,549
$16,722$16,722
$15,937$15,937
$15,193$15,193
$14,487$14,487
$13,816$13,816
$13,181$13,181
$21,579$21,579
$37,280$37,280
$34,405$34,405
$31,772$31,772
$29,361$29,361
$27,152$27,152
$25,129$25,129
$23,276$23,276
$33,066$33,066
$72,052$72,052
$64,203$64,203
$57,275$57,275
$51,160$51,160
$45,762$45,762
$40,995$40,995
$36,786$36,786
1
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
3-G3-G
Answers to Exercise 3BAnswers to Exercise 3B
8%
4% $10.40 $10.82
Interest Rate 1 Year 2 Years 4 Years 6 Years
?? ?? ?? ??
????
$10.80 $15.87$13.60$11.66
$12.65$11.70
654321
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Rule of 72Rule of 72
3-H3-H
7272Interest RateInterest Rate
==Years Needed toYears Needed to
Double InvestmentDouble Investment
7272 Interest RateInterest RateRequiredRequired==
Years Needed toYears Needed toDouble InvestmentDouble Investment
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Rule of 72: $10,000 InvestedRule of 72: $10,000 Invested
3-I
6
12
18
24
Year 3% 6% 12%
INTEREST RATEINTEREST RATE
$20,000$20,000 $40,000$40,000 $160,000$160,000
$20,000$20,000
$40,000$40,000
$80,000$80,000
$20,000$20,000
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
FinancialFinancialPlanningPlanningPyramidPyramid
PennyStock
Commo- dities
CollectiblesSpeculative Stock / Bonds /Mutual Funds
RealEstate
Blue-ChipCommonStock
GrowthMutual Funds
High-GradeConvertible
Bonds
High-GradePreferred
Stock
BalancedMutual Funds
High-GradeCorporate Bondsor Mutual Funds
High-GradeMunicipal Bondsor Mutual Funds
Money MarketAccounts
or Mutual Funds
Certificatesof Deposit
U.S. SavingsBonds
Insured Savings / Checking Accounts
TreasuryIssues
Highest RiskHighest RiskHighest EarningsHighest Earnings
Lower Lower RiskRisk
Lower Lower EarningsEarnings
3-J
NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for YouUnit Three – Investing: Making Money Work for You
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NEFE High School Financial Planning ProgramNEFE High School Financial Planning ProgramUnit Three – Investing: Making Money Work for You
Interest RateInterest Rate
3%3%
24 Yrs.24 Yrs.
$800$800
4%4%
6%6%
8%8%
12%12%
6 Yrs.6 Yrs. 9 Yrs.9 Yrs. 12 Yrs.12 Yrs. 18 Yrs.18 Yrs.
$400$400
$400$400
$400$400
$200$200
$200$200
$200$200
$200$200
$200$200
The Impact of Higher Returns The Impact of Higher Returns on Savings and Investmentson Savings and Investments
Rule of 72: The approximate frequency with which $100 doubles at Rule of 72: The approximate frequency with which $100 doubles at specific interest ratesspecific interest rates
3-K 21
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Dollar Cost AveragingDollar Cost Averaging
AmountAmountInvestedInvested
Share Price ($)
SharesPurchased
$1,000.00 $20.00 50.00
AmountAmountInvestedInvested
Share Price ($)
SharesPurchased
$100.00 $20.00 5.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$19.50
$19.25
$19.75
$19.20
$18.90
$18.00
$18.60
$19.78
5.13
5.19
5.06
5.21
5.29
5.56
5.38
5.06
$1,000.00$1,000.00 $20.00$20.00 50.0050.00 $19.39*$19.39* 51.6651.66
$100.00 $20.90 4.78
One-Time Investment Dollar-Cost Averaging
$1,000.00$1,000.00
3-L * Average Share Price* Average Share Price4321