Life Skills Development/Unit Four/Savings and Investments/Lesson

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What is saving?



One colour for each category

Saving generally means putting money aside for a short term goal that you hope to reach within five years.You save for a dowmpayment of a house or car that you hope to buy in a few years,security is a form of an emregency cash fund. Saving refers to preserving money for future use-typically by putting it on deposit-this is distinct from investment where there is an element of risk. Personal disposable income minus personal consumption expenditure is defined in economics as personal savings.In other words the exess money which is known as surplus that is not consumed immediately by goods and services is what you save.

Saving the Act Savings the Product
Refers to an increase in one’s assets,Refers to an increase in net worth Refers to one part of one’s savings accounts, Or it refers to all of one’s assets
An activity occurring over time, a flow variable Something that exists at any one time, a stock variable.

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Review your budget from Money Management - Topic 1 -Budgeting and determine what areas, if any, can be reduced, amended or eliminated in an effort to increase your savings total.

Do not pass these kinds of signs by and think that these Conventions are not for you

What is Investment?



An investment is all about risk,it can be an asset or item that is purchased with the hope that it will generate income usually called Portfolio Income.It is advisible for you to diversify your money,that is insead of putting your money in one stock its perferebly wise to invesst in a bunch of companies.Diversification is key when investing;you never want all your money riding on one or two stocks;if they implode,you will be in big trouble.

In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price; these include the purchase of bonds, stocks or real estate property.


Numeracy Skills Calculate the actual cost of 20units whose bid price is $14,00 and offer is $i6.00 pe unit.What is the difference in the prices which is known as capital gain/loss

A share in acompany listed on the stock market cost $40.00.In five years it appreciates to$65.99,by what percent the stock appreciate?I bought 20 of those share initially at $49.99 and i want to sell at the new price.How much profit would i make?

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Self Assessment

QUESTION: What is the difference between Savings and Investments?

When we refer to investing, we are talking about investing in stocks or mutual funds or your retirement in a few decades to meet your long term goals.Saving is not the same thing as investing. The big difference is the risk you are willing to take with your money. If you are saving up for a short term goal, such as a down payment on a home that you will want to buy in a few years, paying off your debts, or saving to buy a car or to make a home improvement, that money should never be invested in stocks or mutual funds. If you need your money in less than five years, your money does not belong in stocks. So if you intend to use your money in the next few years, you do not want to run the risk that your account will have taken a downturn just when you need it. You want to play it safe with your savings. You will not have the big upside that stocks offer, but you also will not have any of the downside. Your money will grow, earning interest at a modest rate.

Savings Investments

(for ten Years) @ 3% per annum S.I.=(P*R*)/100 S.I.=$600 10 yrs=$2600


(for ten years) @ $20 at yr.1 and $40 at yr. 10 per unit share yr.1=100 shares @ $20 = $2000.00 yr. 10= 100 shares @ $40= $4000.00.

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  1. Discover ways of saving your money at financial institutions such as Scotia Bank, Royal Bank of Trinidad and Tobago, Republic Bank, Unit Trust, Credit Unions, Sou - Sou plans, etc.
  2. Explain what are the advantages and disadvantages of borrowing money from the banks and Credit Unions, as well as how one goes about securing a loan.
  3. Explain what the stock market is, how it works and how to invest your money.
  4. Discuss the benefits of a savings plan and then create one of your own.




" An investment in knowledge pays the best interest." The Major Investment Types

Higher Risk Investments

The decision about the investment you choose will be influence by growth or capital appreciation as well as the profit known as capital gain. The following are examples of high risk investments: 1)Stocks 2)Corporate and municipal bonds 3)Mutual funds 4)Real estates 5)Collectables 6)Future contracts

Higher risk investment choices include:

  • Corporate and municipal bonds
  • High-quality corporate stock with a history of steady earnings
  • Telephone, gas or electrical utility stocks
  • Mutual funds that focus on current income

Higher risk investment choices for capital growth include:

  • Common stocks in growth oriented companies
  • New or small companies that have good future potential
  • Mutual funds that focus on capital growth
  • Real estate in growth areas

Stocks: When you own shares of stock you become part owner of a company. If the company does well, the value of your stock should go up over time. If the company does not do well, the value of your investment will decrease. Companies distribute a portion of their profits to shareholders as dividends.

Companies issue two types of stock, common and preferred. Common stock is the basic form of ownership in a company. People who hold common stock have a claim on the assets of a firm after those of preferred stockholders and bondholders.

Preferred stock is ownership in a company which has a claim on the assets and earnings of a firm before those of common stockholders but after bondholders. The safety of the principal of preferred stock is greater than that of common stock.

Selecting individual stocks requires time, effort and knowledge. The objective of buying stocks is to choose those that will increase in value over time. The friendly advice, “Buy low and sell high” is easier said than done. Selecting stocks is both an art and a science.

Bonds: When you own a bond you have loaned money to a company or a governmental unit. In return, the borrower promises to repay the amount borrowed plus interest. Corporate bonds are issued by publicly owned companies, while municipal bonds are issued by state or local governments.

The price of a bond will fluctuate as interest rates go up or down. If you hold the bond to maturity you will receive an amount stated on the bond known as the face value. For example, if you buy five corporate bonds at $1,000 each and the bonds mature in 20 years, even if the value of the bond changes over the period of time you hold it, the bonds will be worth a total of $5,000 at the time of maturity. In addition, the borrower may promise to pay you an interest payment twice a year for 20 years. The declared interest of the bond is called the coupon rate.

The risk in purchasing corporate bonds is that the corporation may not be able to pay interest or return your principal at maturity.

Mutual Funds: A mutual fund invests the pooled money of its shareholders in various types of investments. The fund manager buys and sells securities for the fund’s shareholders. Mutual funds are not risk free. Their values rise and fall along with the securities in the fund.


1) Risk Tolerance: Can you live with the risk that your investments will decline in value, even temporarily.

2) Time Horizon and Goals: when will you need your money.

3) Knowledge: Your investing knowledge should influence your choice.

Once you have investment portfolio in place it should evolve simalteanously with your life.

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Self Assessment

Question: What is the Stock Market?

Answer: The Stock Market, also called the equity market, is a way for companies to raise money from those with cash to invest. Investors make money (hopefully) from buying shares in two ways – the income from dividends that the company pays to shareholders and from the capital gain on shares, realised when shares are sold at a higher price.

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Self Assessment

Question: How do share prices rise and fall?

Answer: Prices rise and fall for a number of reasons.

Factors specific to the firm – These are, of course, the perceived prospects of the company, particularly in delivering growth in profits and paying a satisfactory dividend to shareholders.

Analysts make the recommendations about whether particular companies are likely to be a sound investment. Changes in these recommendations, for better or worse, can significantly influence the price of a stock. The company’s own news releases are closely monitored. Most large companies report their figures each quarter, and any change in the expected fortunes of the company will be reflected in the share price. Recently there has been a spate of ‘profit warnings’ – companies informing their shareholders and the market that profits will be lower than expected – sometimes causing quite sharp price falls.

General market factors – Economic news often has an immediate effect on the stock market. Broadly speaking, economic growth is seen as good for equities since higher growth leads to higher corporate profits. Therefore, any positive news, such as lower unemployment or increased output, is likely to be seen as good for share prices. However, inflation is the enemy of the investor, and positive economic news will not be welcomed by the markets if it is seen to imply increased inflationary pressures.

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1. Develop a questionnaire that would aid to ascertain the best stock for you to invest in based upon your particular reviewed budget.

This questionnaire should seek to obtain the following information:

  • Cost of Stock
  • Interest/Dividend rate
  • Investment types (retirement, US, Money market etc)
  • Length of Investment for returns
  • Projected income based upon investment amount.

2. Visit Investment Agencies (inclusive of banks, credit unions and broker ships) to ascertain which agencies offers the best returns to meet your needs.



Charity- The First Piggy Bank of Life Savings- The Second Piggy Bank of Life Investment- The Third Piggy Bank of Life.

Money without financial intelligence is money soon gone. Money empowers one to make certain choices in life. It determines what you wear to what kind of car you drive. It also impacts our decision to work or how much we give to charity. This empowerment can only be achieved via Financial Intelligence.

Portfolio Contents

  1. A budget showing how you intend to cut back on expenditure.
  2. List the ways in which you save and waste money each month.
  3. Participate in a project where research and “invest” in a particular stock, observing it to see whether or not you can make a wise decision.

Unit summary

In this unit you learned about putting money aside is simply not enough but placing your savings in banks or credit unions is wiser and more secure. You now understand that investing requires taking risk using your finance on items in hope for future growth and earnings.

Checklists of Performance Task

1. A Savings Plan, showing how you intend to cut back on expenditure

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I attempted to cut back my expenditure
2. I made detailed accounts of what and how I intend to save from my income
3. I made an attempt to follow this budget
2. List the ways in which to save and waste money each month

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I listed the ways in which I save money
2. I listed the ways in which I waste money
3. Reflections on research which local financial institutions are best suited for their individual needs.

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I researched banks
2. I researched credit unions
3. I researched online banks
4. I researched other financial institutions such as Unit Trust Corporations
4. Reflections on factors are most important to consider when choosing a financial institution.

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I discussed interest rates
2. I discussed the conditions under which they grant loans
3. I discussed the types of loans offered
4. I discussed the returns on savings at various institutions
5. Making my Savings Plan

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I have written my reflections on my saving habits
2. I have listed two ways in which I current waste money and plan to stop.
3. I have listed two ways in which I plan to save money.
4. I have state my plans to cost-conscious regarding eating more nutritious food
5. I have state my plans to cost-conscious concerning my entertainment – e.g. parties, drinking and movies.
6. I have stated my plans to eat nutritiously as opposed to eating fast food regularly.
6. Create a project where research and “invest” in a particular stock, observing it to see whether or not you can make a wise decision.

RUBRIC of performance criteria V. Well Done Well Done OK Not Ok- Will redo by ….
1. I researched the particular stock
2. I observed the stock market, paying particular attention to the stock that I “bought”

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