Talk:Life Skills Development/Unit Four/Savings and Investments/Archive

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UNIT 3: Savings and Investment.


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. This unit allows trainees to acquire knowledge on saving and invcesting to improve their short-term and long-term goals.

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Upon completion of this unit the learner will be able to:

  • Identify different methods of saving
  • Describe different types of investments
  • Explain the importance of saving and investing
  • Discuss the role of financial institutions
  • Differentiate between the terms savings and investment
  • Prepare an investment portfolio


Bonds : The loaning of money to a company or a government unit.

Collectables : Refers to items that not antique but expected to appreciate in value.

Corporate Bond : Long-term debt securities of various types issued by private companies to raise capital.

Investments : It can be an asset or an item that is purchased with the hope that it will generate income.

Municipal Bonds : Bonds issued by government authoritie to raise capital to help with financial nedds and projects.

Savings : Generally means putting money aside for a shor term goal that you hope to achieve.

Stock Markets : Is a way for companies to raise money from those with cash to invest.

Real Estate : This encompasses land along with anything permanently affixed to the land, such as buildings.

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  1. Did you have a piggy bank or a special place where you saved your coins when you were very young?
  2. When you were a child /teenager, did others come to you to borrow money, when theirs was all spent? or were you the regular borrower?
  3. As an adult learner, do you think you shoult wait until you find a better paying job to start saving?
  4. What is your investing profile?
  5. Can you live with the risk that your investment will decline in value even temprarily?
  6. Do you think savers are losers?

The answers to the questions listed above and others will be addressed in this Unit. Do not be too concerned if you have not met some of the terms. Read on and discover that some of the concepts that you held previously are changed, modified or proven to be correct.

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 excess money which is known as surplus that is not consumed immediately by goods and services is what you save.

Different Types of Savings

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, and by how much.

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?

The Different Types of Investments

Cash Investments: are generally the best investments for short-term holding periods. it is mostly invested because it's liquid and secure and can be retrieved at anytime. Some of the cash investments that be found are Banks/Savings Accounts, Money-Market Mutual Funds, Certificates of Desposits and Teasury Bills. Sometimes cash investments are used for long-term goals such as fixed annuities and cash value of life insurance.

Bonds: loaning a company, government or municipality a sum of money in return for income is known as investing in a bond. Municipal Bonds are issued by state and local government agencies. Corporate Bonds are issued by corporations to fund their financial needs, but it does not dilute company ownership.

Stocks: this is when corporations divide their ownership interest into segments or shares of stock.

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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 Banks, Mutual funds, Credit Unions, Sou - Sou, etc.
  2. Explain the advantages and disadvantages of borrowing money from these institutions.
  3. Explain how the stock market works and how to invest your money in it.
  4. Discuss the benefits of a savings plan and then create one of your own at an institution of your choice.

Higher Risk Investments

The decision about which institution you choose to invest in will be influenced 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 your investment portfolio in place it should evolve simultaneously 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.

What is a Financial Institution

An agent that provides financial services for its participants/clients is known as a financial institution. They facilitate the flow of money through the economy. Some financial institution are Banks, Credit Unions, Online Banks, Stock Brokerages and Asset Management Firms.

Roles of Financial Institution

1) They provide services as intermediaries of the capital and debt markets.

2) They are responsible for those in need of funds by transferring them from investors to companies.

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 Tasks

# RUBRIC of performance crieria V. Well Done Well Done OK Not ok - Will redo by
1 I reflected on my saving habits, including
   a)as a child
   b)as a young borrower/lender
   c)as a procrastinator or not in starting saving
   d)My investing profile
   e)My inclination to take risks
2 After reviewing my budget my budget, I started what areas I will reduce/amend/eliminate to increase my savings total and by how much per category
    a)Differentiating between my wants and needs
    b)Cease spur of the moment shopping on my wants
    c)Tracking my spending
3 I wrote the difference between capital gain and loss
   a) I identified what is a bid price and an offer price
4 I calculated the capital gain /loss of 20 unit with a bid price of $14.and an offer of $16.per unit.
   20 x 16=$320
   Bid Price
   20 x 14=$280
   Offer Price-Bid Price= Capital Gain
   Capital Gain is $40.00
5 I calculated the percentage% that some stock appreciated
   a)$66. - $40.= $26.00
     $26.00/ 40 X 100 = 65%
   b)$50.00 X 20 = $1000.00
     $66.00 X 20 = $1320.00
     Profit = $320.00
6 I reflected on and wrote about the difference between savings and investment in terms of
   a)Investing in stock from mutual and other funds to meet long term goals
   b)Willingness to take risks over time.
7 I explained the advantages and disadvantages of saving and borrowing money from different financial institutions
    a) banks
    b) mutual funds
    c) credit unions
    d) sou sou
8 I reflected on the factors to consider when investing in the stock market
    a) common stock
    b)preferred stock
    c)corporate bonds
    d)municipal bonds
9 I considered which were higher risk investments
    a)my risk tolerance
    b)my time limits and goals
    c)my knowledge about investments
10 I explained why share prices rise and fall, including
    a)perceived prospects for profit of the company
    b)analysts' recommendations of company as a sound investment
    c)company's own news releases about expected prices and profits
    d)general economic growth
    e)lower unemployment
    f) inflation
11 I researched and reflected on which local financial institutions are best suited to assist me and noted the information in my portfolio
12 I developed a questionaire to help me know the best stock to invest in, within my budget, including
    a)cost of stock
    b)interest/ dividend rate
    c)investment types
    d)Length of investment, for returns
    e)projected income based on investment amount


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