Making Money…and then having your money make money…and then

having that money make money

Checking Account

• Easy to open– Have a minimum requirement but can be very low

• You put money in through deposits• You take money out through cash

withdrawals, online bill pay or debit card usage.

• Earns interest – Currently about 0.01% or 0.03%

Savings Account

• Very similar to checking account• Hopefully pays a higher interest• Usually has a minimum balance that is slightly

higher than checking • Limited number of withdrawals allowed a

month • Can be used if you overdraft your checking

account– Take out more money than you actually have

Stocks

• Owning a little piece of equity in a company– Think of every stockholder as a “little shark”

• Different stock exchanges where stocks are bought and sold– NASDAQ – virtual market– NYSE – actual place

• Price is determined by supply and demand!– How many people want to buy this stock vs. how

many want to sell it

Stocks• Only public companies have stock• Stocks can make you money by increasing in

value• Sometimes companies pay dividends – Give a percentage of their profits to the stockholders

• Make money by buying/selling stock smart!– BUY LOW– SELL HIGH

• Important that everyone plays fair in the stock market!

Bonds

• Basically you loaning out your money in exchange for interest

• Most common = Government Bonds • Have a “maturity date”– When you get your money back with interest

• Rated based on risk by credit agencies • Higher the reward in terms of payout, riskier

the bond

CDs

• Certificate of Deposit • Very low-risk investment • You pick an amount of time your money will

be off limits to you• You find a CD that offers you the best interest

rate for that period of time• The money sits, unavailable to you, and eanrs

interest until time is up!

IRA

• Individual Retirement Accounts• Several Different Types• Tax Deductible Investment • Penalties for removing money early • VERY good investment • When your employer sets this up it is called a

401K – Put part of your salary into this account each month – Sometimes employers will put money in as well

Mutual Funds

• Investment made into a diversified fund– Diversified = made up of stocks, bonds and other money

market investments• Fund is operated by a money manager – Goal is to make returns for those that invest in the fund– Someone else is handling your investments

• Allows you to invest a small sum of money in a larger, diversified fund

• Relatively low risk if the person in charge is good at what they do and trustworthy– Could get Bernie Madoff

Assignment• You have $10,000 to invest in whatever options we

have discussed today that you think would be beneficial.

• Decide how you will invest your money.– Will you spread out the money over several types of

investments? If so, which ones? – If you invest in the stock market, which stocks will you

purchase and how much will you buy?• You can find this information online

• Describe the risk vs. reward for each decision you make!