ACHIEVING WEALTH
WHERE SHOULD I PUT MY MONEY?
Investing is putting money away for the future while also earning money over time.
When you want to invest your money, there are three options for you. You can keep your money at home like in a piggy bank. You can also keep your money in a bank. Your third option is to put your money in the stock market.
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Stock Market
Savings Account
Piggy Bank
Earns over time
Nothing
Interest
Return
PRO
- Very accessible
- Very accessible
- Earns money with interest
- Kept safe*
- Generally, value of investments increases over time
-Over a longer period of time, stocks have a higher rate of return than interest from a savings account
CON
- Could be lost or misplaced
- Could be stolen
- No growth in value over time
- Could be lost or misplaced
- Could be stolen
- No growth in value over time
- Currently, the interest rates are very low (less than 1%)
- Volatile (risk of value going down)
- In order to get the best investing advice, a financial advisor is needed. Note these advisors have fees.
* FDIC (Federal Deposit Insurance Corporation) insures bank accounts up to $250,000 per depositor.
PIGGY BANK
If you choose to keep $20 at home, after a day, a week, a year, you will only have $20. Usually, this is what us high school kids do when we get money because then it is accessible. And very spendable!
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BANK
Interest is money paid regularly at a particular rate for the use of money from another source.
Compound interest is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
When you use credit and don’t pay off the entire amount by the initial due date, you are setting yourself up to pay compound debt.
After a set amount of time, the $50 you originally put into the bank increases. Today interest rates are really low. Does anyone know what the current interest rate is? They’re a little less than 1% per year. After a year you would only get a few cents over $50, but if the interest rates are higher, at lets say 5%, you’d get quite a bit more.
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STOCK MARKET
A stock market is the place where companies sell pieces of their shares to the public. The really important thing about the stock market is that it is riskier than a bank but can give a higher rate of return over time.
Return and interest are pretty similar:
Interest is the additional money you get when you put money in a bank account. Return is the additional money you get when you put your money in the stock market.
The stock market generally goes up over time. So if you have that extra money after you have taken care of your “immediate needs” and some of your “wants” when budgeting, then you can invest in the stock market if you choose to do so.
There is an example of how a stock, in this example Hershey’s, increased over the years if you invest early. That’s the whole point! There are many ups and downs in the stock market, but investing over time allows for money to generally grow.
