Unit 4 – Investing: Making Money Work for You

Unit 4 - Investing: Making Money Work for You

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Savings and Investments Unique Savings Features Common Features Unique Investment Features What are some features common to both investments and savings? 3-A

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Investing Weekly at 5% Interest Amount Saved Per Week Value After 10 Years 7.00 4,720 14.00 9,440 21.00 14,160 28.00 18,880 35.00 23,600 3-B 1

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You * Investing Annually to Achieve a Value of 20 3-C 1 Year 2 Years Goal 4 Years 6 Years 4% 20.80 21.63 23.40 25.31 5% 21.00 22.05 24.31 26.80 6% 21.20 22.47 25.25 28.37 8% 21.60 23.33 27.21 31.74 10% 22.00 24.20 29.28 35.43 1 2 3 4 5

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *To Have 50,000 at 8% Interest Number of Years Saving Monthly Amount Daily Amount* 6 543.33 17.79 4 887.31 29.06 2 1,928.03 63.17 * Assumes a 365-day year for daily amounts 3-D 1 2 3

NEFE High School Financial Planning Program *Investing a 10,000 Lump Unit Three – Investing: Making Money Work for You Interest Rate 3-E Sum 20 5 Years 10 Years 15 Years 5% 12,763 16,289 20,789 26,533 6% 13,382 17,908 23,966 32.071 7% 14,026 19,672 27,590 38,697 8% 14,693 21,589 31,722 46,610 9% 15,386 23,674 36,425 56,044 10% 16,105 25,937 41,772 67,275 11% 16,851 28,394 47,846 80,623 12% 17,623 31,058 54,736 96,463 1 Years

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Investing 1,000 Interest Rate 3-F 5 Years 10 Years 5% 5,526 6% Annually 15 Years 20 Years 12,578 21,579 33,066 5,637 13,181 23,276 36,786 7% 5,751 13,816 25,129 40,995 8% 5,867 14,487 27,152 45,762 9% 5,985 15,193 29,361 51,160 10% 6,105 15,937 31,772 57,275 11% 6,228 16,722 34,405 64,203 12% 6,353 17,549 37,280 72,052 1 1

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Answers to Exercise 3B 3-G Interest Rate 1 Year 2 Years 4 Years 6 Years 4% 10.40 10.82 11.70 ? 12.65 ? 8% 10.80 ? 11.66 ? 13.60 ? 15.87 ? 1 2 3 4 5 6

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You 72 Interest Rate 72 Years Needed to Double Investment 3-H *Rule of 72 Years Needed to Double Investment Interest Rate Required

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Rule of 72: 10,000 Invested INTEREST RATE Year 3% 6% 6 20,000 12 20,000 18 24 3-I 12% 40,000 80,000 20,000 40,000 160,000

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You *Financial Planning Pyramid Highest Risk Highest Earnings Commo- Penny dities Stock Collectibles Blue-Chip Common Stock Balanced Mutual Funds Money Market Accounts or Mutual Funds Insured Savings / Checking Accounts 3-J Speculative Stock / Bonds / Mutual Funds Growth Mutual Funds Real Estate High-Grade Preferred Stock High-Grade Convertible Bonds High-Grade Municipal Bonds or Mutual Funds U.S. Savings Bonds Certificates of Deposit High-Grade Corporate Bonds or Mutual Funds Treasury Issues Lower Risk Lower Earnings

NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You The Impact of Higher Returns on Savings and Investments Rule of 72: The approximate frequency with which 100 doubles at specific interest rates Interest Rate 6 Yrs. 9 Yrs. 12 Yrs. 18 Yrs. 3% 200 4% 200 6% 200 8% 12% 3-K 24 Yrs. 200 200 1 400 400 2 400 800

*Dollar Cost Averaging NEFE High School Financial Planning Program Unit Three – Investing: Making Money Work for You One-Time Investment Amount Invested Shares Share Price ( ) Purchased Amount Invested 1,000.00 20.00 100.00 20.00 5.00 100.00 100.00 100.00 19.50 19.25 19.75 5.13 5.19 5.06 100.00 100.00 100.00 19.20 18.90 18.00 5.21 5.29 5.56 100.00 100.00 100.00 18.60 19.78 20.90 5.38 5.06 4.78 1,000.00 19.39* 51.66 1,000.00 3-L Dollar-Cost Averaging 50.00 20.00 50.00 1 2 3 4 Shares Share Price ( ) Purchased * Average Share Price