budgeting, saving, and investing money

CHAPTER 24 1© Thomson/South-Western Slide

BUDGETING, SAVING,BUDGETING, SAVING,AND INVESTING MONEYAND INVESTING MONEY

24.1 Budgeting Money

24.2 Saving Money

24.3 Investing Money

Chapter 24


BUDGETING MONEYBUDGETING MONEY

Identify your own personal income and spending patterns

Name and describe the four steps involved in developing and using a budget

ObjectivesObjectives

Lesson 24.1


INCOME AND INCOME AND SPENDING PATTERNSSPENDING PATTERNS

Income is money coming in. An expenditure is money that is spent.

Lesson 24.1


RECORD OF RECORD OF INCOME AND INCOME AND EXPENDITURESEXPENDITURES

Lesson 24.1


DEVELOPING AND DEVELOPING AND USING A BUDGETUSING A BUDGET

A budget is a plan for managing income and expenditures.

Four steps in developing a budget Establishing goals Estimating income and expenditures Setting up the budget Following and revising the budget

Lesson 24.1


ESTABLISHING GOALSESTABLISHING GOALS

Identify what you need and want All family members should participate Be realistic Be specific Include short-range, medium-range,

and long-range goals Make a list

Lesson 24.1


GOALS WORKSHEETGOALS WORKSHEET Lesson 24.1


ESTIMATING INCOME ESTIMATING INCOME AND EXPENDITURESAND EXPENDITURES

Choose a budget period Keep track for at least four weeks Figure out average income per budget

period Figure out average expenditures per

budget period

Lesson 24.1


SETTING UP THE BUDGETSETTING UP THE BUDGET

Savings is cash set aside in a bank account to be used for financial emergencies and goals

Regular expenditures, sometimes called fixed expenditures, are those essential monthly payments that are usually the same amount each month.

Variable expenditures are day-to-day living expenses.

Lesson 24.1


EXAMPLES OF EXAMPLES OF REGULAR EXPENDITURESREGULAR EXPENDITURES

Rent or mortgage payment Utilities Insurance Auto payment Credit or loan payments

Lesson 24.1


EXAMPLES OF EXAMPLES OF VARIABLE EXPENDITURESVARIABLE EXPENDITURES

Food and beverage Clothing Transportation Household

Medical care Entertainment Gifts and

contributions Taxes

Lesson 24.1


HOUSEHOLD HOUSEHOLD BUDGET BUDGET FORMFORM

Lesson 24.1


FOLLOWING AND FOLLOWING AND REVISING THE BUDGETREVISING THE BUDGET

Following a budget involves Allocation, or distribution, of income to

the various items on the budget Keeping accurate records of expenditures

A line item is a single entry, or budgeted item.

Lesson 24.1


SAVING MONEYSAVING MONEY

Discuss the importance of setting aside a portion of income for savings

Name and describe the two basic types of savings accounts

Compute interest rate returns on savings


Lesson 24.2


WHY SAVE?WHY SAVE?

Saving will ensure that you have funds available to meet a financial emergency.

Saving will allow you to achieve financial goals.

Lesson 24.2


TYPES OF SAVINGS ACCOUNTSTYPES OF SAVINGS ACCOUNTS

Regular savings accounts Also called passbook accounts Offer safety, convenience and liquidity

Liquidity refers to an asset that can be easily converted into cash.

Time deposits A certificate of deposit (CD) is money that is

deposited into an interest-bearing account for a predetermined length of time and rate of return.

Lesson 24.2


SAVINGS DEPOSIT FORMSAVINGS DEPOSIT FORM Lesson 24.1


SAVINGS WITHDRAWAL FORMSAVINGS WITHDRAWAL FORM Lesson 24.1


FIGURING INTEREST RATESFIGURING INTEREST RATES

Annual interest rate Frequency of interest compounding

Compounding is a process in which an institution adds interest to an account, the balance rises, and the account continues to earn more interest based on the higher balance.

Interest pay periods Annual percentage yield

Lesson 24.2


INTEREST RATESINTEREST RATES Lesson 24.1


COMPOUNDING INTERESTCOMPOUNDING INTEREST Lesson 24.1

More frequent interest compounding results in higher Annual Percentage Yield (APY).

More frequent interest compounding results in higher Annual Percentage Yield (APY).

More frequent interest compounding results in higher returns.More frequent interest compounding results in higher returns.


SAVINGS GROWTHSAVINGS GROWTH Lesson 24.1

Based on 5.25 percent interest, compounded dailyBased on 5.25 percent interest, compounded daily


EFFECT OF INTEREST RATESEFFECT OF INTEREST RATESON SAVINGS GROWTHON SAVINGS GROWTH

Lesson 24.1

Based on a $50 a month deposit, compounded dailyBased on a $50 a month deposit, compounded daily


INVESTING MONEYINVESTING MONEY

Discuss advantages and disadvantages of investing

Explain the following types of investments: stocks, bonds, and money market funds


Lesson 24.3


WHY INVEST?WHY INVEST?

Investing is the process of using money not required for personal and family needs to increase overall financial worth.

Investing is different from saving. There is potential for making a lot of money. There are risks of losing money.

Lesson 24.3


TYPES OF INVESTMENTSTYPES OF INVESTMENTS

Stocks Mutual funds Bonds Money market funds

Lesson 24.3


STOCKSSTOCKS

Shares of ownership in a company are called stock. Brokers are individuals or companies that specialize

in selling stocks and other financial investments. A commission is a fee paid to a broker for

purchasing stock for you. Dividends are profits that a company divides among

its shareholders. Capital gain refers to an increase in the value of

stock or another asset.

Lesson 24.3


MUTUAL FUNDSMUTUAL FUNDS

A mutual fund is an investment company that pools the money of thousands of investors and buys a collection of investments that may include stocks, bonds, and other financial assets.

Advantages of mutual funds Diversification Professional management

Lesson 24.3


BONDSBONDS

A bond represents a loan to a company or government agency.

Types of bonds Corporate bonds Government bonds Municipal bonds

Lesson 24.3


MONEY MARKET FUNDSMONEY MARKET FUNDS

A money market fund is a type of mutual fund that invests in short-term, high-liquidity investments.

Lesson 24.3


INVESTMENT PLANNINGINVESTMENT PLANNING

Decide on goals and stick to them Do not get greedy Stay away from hot tips Educate yourself about investing

Lesson 24.3

budgeting, saving, and investing money

Documents