BELL RINGER USING A CIRCLE MAP, brainstorm a list of ways that you can save and invest wisely. Be ready to take notes after a brief class discussion…

BELL RINGERUSING A CIRCLE MAP, brainstorm a list of

ways that you can save and invest wisely.Be ready to take notes after a brief class

discussion…

Financial Services and Investment Plans

(ECON-U1-L3)SSEPF1c; SSEPF2a-b

IF YOU’RE SO SMART, WHY AREN’T YOU RICH?

INTRODUCTIONDeciding how to save or invest money is importantand exciting. But because there are many differentsaving and investment possibilities,understanding and evaluating the options can beconfusing. The purpose of this lesson is to introducestudents to some basic saving and investmentoptions and vocabulary. Students apply TheDecision Grid introduced in Lesson 2 to evaluatethe trade-offs involved in five different saving orinvestment opportunities.

CONCEPTSCapitalInvestmentSavingsOpportunity costSecurities: stocks, bonds, mutual fundsSavings accounts, certificates of depositRisk versus returnLiquidity

CONTENT STANDARD

In every economic system, consumers, producers,

workers, savers, and investors seek to allocate

their scarce resources to obtain the highestpossible return, subject to the institutional

constraintsof their society.

OBJECTIVESReview and discuss different meanings for

the terms “investment” and “capital.”Discuss basic rules for wise investing.Demonstrate understanding of five

different investment options using a decision grid.

ECONOMICS INVESTMENT: spending by businesses on

capital goods such as factories, tools, and machinery. Sometimes called “real investment.” Investment in this sense results in capital formation and leads to economic growth.

CAPITAL: goods produced by people to help them make other goods. Sometimes called “capital goods” or “real capital.” The economic definition of capital refers to things such as factories, machines, and tools.

PERSONAL FINANCE DEFINITIONSINVESTMENT: buying assets such as

stocks or bonds with the expectation of earning interest or income, or making a profit.

CAPITAL: an asset such as money owned or used by a person or a business. Using personal finance definitions, capital is used to invest in something to try to produce more money or wealth for the investor.

IN THIS LESSON…The personal finance definitions of capital

and investment differ from the economics definitions.

In this lesson, investment will be used in the personal finance sense.

SAVINGS Define savings as refraining from

consuming (after paying taxes). The opportunity cost of saving: when

people save,they give up current consumption.

SO WHY SAVE?Why do people save, since they are giving

up the opportunity to consume now?

MORE DISCUSSION…People save in order to meet future needs.What are some different ways to save and

invest?After looking at Activity 1, discuss the

investment advice given.

PRACTICEWhich of the following statements BEST

describes the operation of banks?A. Banks take in deposits, for which they pay a

relatively small rate of interest; they then hold a small amount aside and loan out the rest at a higher rate of interest.

B. Banks borrow money from the government at low interest rates, and they loan that money to customers at higher interest rates.

C. Banks, under the license from the government, print money that they then loan out to businesses and households.

D. Banks take in deposits, which they use to pay their employees and other costs.

PRACTICEBanks take in deposits, for which they pay a relatively small rate of interest; they then hold a small amount aside and loan out the rest at a higher rate of interest.

GROUP ACTIVITYGet into groups of 5.Get a copy of Activity 2.Teacher will read introductory paragraph.Each student will assume a role.Take a few minutes to practice.Then each student will read their parts to

the group.

DECISION GRIDSAs a class, discuss some advantages and

disadvantages of the different investment options.

A good way to evaluate the options would be to use a decision grid.

Students complete the grid in their groups.Possible criteria include liquidity (ease of

converting into cash), ease of opening the account or making the investment, and ease of understanding the investment.

The safety of the investment (lack of risk) is another important criterion.

CLOSUREEach group to summarize their decision

grids to the class. What would your group decide, if they

were in David’s place? Understand that there is no one correct decision for David; his choice depends on his goals and priorities.

Students should think for themselves and seek additional information before they act on any investment advice, even from relatives.

EXIT TICKETIn your JOURNALS, answer the following

essential questions:How would you create a savings or

investment plan for a future goal?How do services differ among the different

financial institutions?

HOMEWORK OPTIONSResearch and write up other investment

options. Report on common investment fraud schemes, or the prospect of “investing” in a lottery.

Assume that you had invested $1,000 twenty years ago. Research how various investments fared over the past twenty years.