1. Article Reviews
A. Due Today
2. Junior Seating Chart
3. Small quiz tomorrow
4. Insurance and Investment Test this week!!
5. Altra comes in to do Modoh Island on Tuesday,
Wed/Thurs
Quiz
Compounded Interest vs Simple Interest
Math question
What is compound interest?
What does FDIC insurance?
What is a CD?
What does diversify mean? What investment
does it have to do with?
Pension vs 401(k) vs ROTH
Test
15 Multiple Choice
20 True/False
Short Answer- Life Insurance policy
Approx 45 points
Investments
Short-Term Needs
Emergencies
Vacations
Social Events
Major Purchases
Long Term Needs
Home Ownership
Education
Retirement
Investing
How your money grows
Principal-amount of money deposited by saver
Interest-financial institution pays saver money
called interest
Compound interest- earning interest on interest
YEAR BEG BAL INT END BAL
EARNED
(5%)
1 100.00 5.00 105.00
2 105.00 5.00 110.25
3 110.25 5.00 115.76
Compounding Interest
Know how to do this for the test.
The more often interest is compounded, the
greater your earnings
Where you can save
Commercial Banks- checking accounts,
easy!
FDIC insured…protects 250,000
Credit Unions- not-for-profit organizations
NCUA insured…protects 250,000
Brokerage Firms- buy and sell different
securities (stocks and bonds)
Rebecca has saved $12,000 for her college expenses by
working part-time. Her plan is to start college next year
and she needs all of the money she saved. Which of the
following is the safest place for her college money?
A. Locked in her closet at home
B. Stocks
C. Corporate Bonds
D. A Bank Savings Account
D. A Bank Savings Account
Savings Options
1. Savings Account- high liquidity (can convert
into cash easily)….low interest rate
2. CD- Fixed interest rate for fixed period of
time….3 months to 5 years…..cannot
deposit or withdraw money
3. Money Market Account- liquid…good int
rate. Limited number of transactions.
Investment Options
1. Bonds- organization’s IOU..why?
A. Gov bonds (usually $5,000) are safer than
corporate bonds ($1,000)
2. Mutual Funds
A. Money pooled together by investors…put into
stocks, bonds, other securities
B. Diversification
Types of Retirement income
Gov sponsored Plans
Social Security
You pay in 6.2% and don’t forget that…..
Your employer matches this too!
Can receive at 62 (at discount) full benefits at 67
Types of Retirement Income
Employer-sponsored pension plans
Receive at normal retirement age (59 ½ ) specified monthly
amount based on wages earned and years of service
Employer makes entire contribution to plan
Types of Retirement Income
401 K plans (money taken out of paycheck..goes in
untaxed)
Sometimes employer matches (pure profit)
Match is a maximum of 6%, but you could contribute more.
Types of Retirement Income
Personal Retirement Accounts
Roth IRA…withdraw at 59 ½
Allowed only $5,000
Tax-Free when you withdraw…unlike any other investment!
If you make 120,000 or more income, you are not allowed to contribute to
a ROTH IRA
Traditional IRA
Inflation can cause difficulty in many ways. Which group
would have the greatest problem during periods of high
inflation that last several years?
A. Older, working couples saving for retirement.
B. Older people living on fixed retirement income
C. Young couples with no children who both work
D. Young working couples with children
B. Older People living on fixed retirement
income