Student Activity Packet - 2020-21Mr. Marynovskyy

 Semester Course7.1 Why Should I Invest?Student Activity PacketName: [SAMPLE -- Answers are not inclusive of all possible correct responses.]In this lesson, you will learn to: Recognize the value of young people investing early, regularly, and long-term to extract maximum earnings from their investmentsExplain how compound interest works and how to harness its power when saving and investing Understand the importance of estimating how much you will need for retirementResourcesQuestions1 Discussion PromptsDiscuss these questions with your classmates or with a partner.Estimated time: 5 minsWhat do you know about investing, and where have you learned about it?[Answers may vary]Is investing something you plan to do? [Answers may vary]2A Simple Introduction to Investing Investing is a powerful tool you can use to build your wealth in the long run. So, how does it work? Read through this infographic and then answer the questions to find out!Estimated time: 10 minsYour friend says, “I have some extra money, but I’m not sure if I should save or invest it.” What key questions would you ask your friend to help them figure out what to do? [Answers may vary]How do you envision using the money? Do you need to access the money in the near future? How comfortable are you with risk and the potential that you could lose some of your money? What do you know about investing in the stock market? What is the advantage of investing early for retirement? Your investment has more time to grow and because of the power of compounding returns, the earlier you start the more opportunity your money has to grow. If investing can bring higher returns, why should you put money in a savings account at all? [Answers may vary]Savings account are low return, but also low riskTo save money up for a larger purchase or an emergency fundWhat 3 tips would you give someone who is about to invest their money for the first time? [Answers may vary]Diversify your investments; “don’t put all of your eggs in one basket.”Focus on the fees if you are investing in a mutual fund.Don’t try and time the market; invest for the long term. Keep it simple. Start early. 3Compound Interest ExplainedIn the previous resource, you learned that compound interest is one of the key factors that can help your money grow. Let’s take a deeper look at how compound interest works in this video. Then, answer the questions. Estimated time: 5 minsWhy do you earn more money using compound interest than you would using simple interest? You can earn more money using compound interest than you would using simple interest because compound interest is on the base amount you invested PLUS the money you made in interest in previous years. Simple interest is receiving the same percentage ONLY on the base amount you have in your account every year.Note: While we use the term “compound interest” for investments, it is more accurate to talk about “compounding returns” since investments don’t pay interest like bank accounts. Does compound interest have more of an impact for short-term investments or long-term investments? Why? Compound interest has more of an impact for long term investments because time is necessary for the money made from interest to increase. As the video explained, in 3 years there was a difference of ~$76 between compound and simple interest but if they had invested for longer, there would have been an even larger difference.4ANALYZE: Investing for RetirementFollow the directions on the worksheet to complete this activity. Estimated time: 20 mins5Retirement CalculatorWhen thinking about your retirement, it’s important to estimate how much you think you will need to support yourself so that you can work towards that goal. Use this calculator to fill in the table for each of the 3 people and to answer the questions that follow. Estimated time: 5 minsUse the calculator to fill in the table below. AlexSamanthaJordanInfo: 22 yrs old; pre-tax income = $35,000; $0 savings; saves $200/month35 yrs old; pre-tax income = $70,000; $30,000 savings; saves $600/month55 yrs old; pre-tax income = $95,000; $20,000 savings; saves $300/monthHow much will they need to retire at age 67?$1.31 million$2.02 million$1.84 millionHow much will they actually have at age 67?$0.68 million$1.02 million$0.11 millionHow much will they need to save per month to get how much they need by age 67?$385$1330It is not possible for him to meet the goal.What assumption is this calculator making? That you will maintain the standard of living you have now into retirement. If, for example, Samantha is worried that she’ll need to save so much for retirement each month, she could save less. However, she has to know that she will live below her current standard of living. Why do you think it’s important to estimate how much you will need in retirement? You can know how much you have to save in order to be able to retire when you want. This allows you to plan ahead! Also the earlier you start, the less you will need to save as your investment will have more time to compound. 6Exit TicketFollow your teacher’s directions to complete the Exit Ticket.Estimated time: 5 mins What is one advantage of starting to invest as early as possible? Your money has more time to grow which increases the benefit of compounding returns. How does simple interest differ from compound interest? Simple interest is calculated on principal alone; compound interest is calculated on the principal as well as the interest you’ve already earned.Identify one way in which saving is different than investing. [Answers may vary]Saving is better for short-term, emergency fundsSaving usually earns a lower interest rate Saving is generally lower-risk than investing ................
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