5.1 Why Should I Invest?

Instructions

OBJECTIVES & STANDARDS
Math Objectives
Compare the exponential growth of investments and savings accounts with different rates of return
Common Core Math Standards
Link to all CCSS Math
CCSS.PRACTICE.MP1
CCSS.PRACTICE.MP2
CCSS.HSF.LE.B.5
Personal Finance Objectives
Define investing and distinguish it from saving
Identify reasons for investing, including outpacing inflation and building wealth
Analyze how compounding builds wealth over time
Reflect on how investing relates to wealth inequality
National Standards for Personal Financial Education
Investing
4a: Describe the impact of inflation on prices over time
8-5a: Explain the benefit of compound interest as compared with simple interest.
8-5b: Demonstrate how annual interest earned increases over time when both the original principal and earned interest are left in a savings account.
DISTRIBUTION & PLANNING
Distribute to students
Student Activity Packet

QUESTION OF THE DAY: If you invested $1,000 in Netflix stock ten years ago, what would it be worth now? 
Write your answer to the question below. Then, compare your answer to the answer on the second slide.

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Write your answer to the question below. Then, compare your answer to the answer on the second slide:
Guess:_______ 
Answer: in 2020: _______ 
Click on the Investment calculator and click on reinvest dividents: 
Answer in 2023: _______ 

INFOGRAPHIC: A Simple Introduction to Investing
What is investing? Study this infographic, stopping at “What to Invest In”, and answer the questions.

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Identify whether each of the following statements describes saving (S) or investing (I). Circle or highlight your answers.

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Why is investing a more powerful tool to build long-term wealth than saving?

EDPUZZLE: Understanding Inflation
One reason you might invest is to “beat inflation,” so your money doesn’t lose purchasing power over time. Watch this video to learn more about how inflation can impact the value of your money. Then, answer the questions either in EdPuzzle or below.

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When price levels increase, purchasing power_______ .

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ACTIVITY: MOVE: Inflation Over Time
Let’s dive in to learn more about inflation and investing. Follow your teacher’s instructions to complete this activity. Then, answer the reflection question.

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Considering the impact of inflation, why is investing important?

VIDEO: Investing Basics: The Power of Compounding
As you’ve learned, investing can help you mitigate the impacts of inflation and build your wealth. Compounding is the key to growing your money. Watch this video to explore how compounding works and can benefit you. Then, answer the questions.

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How can compound interest increase your investment’s growth?

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According to the video, what are three ways you can harness the power of compounding?

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What is the advantage of starting to invest early?

As you’ve learned, investing is a critical tool for building wealth. Unfortunately, not everyone has the same opportunities to take advantage of that. So, who currently benefits from investing? Follow the directions on the worksheet to complete this activity.
ANALYZE: Inequalities in Investing
Investing is the foundation for building wealth. Unfortunately, not everyone has had access to the money or systems needed to invest. In this activity, you’ll explore who’s invested in the stock market, what impact that has, and how it might shift.
Part I: Why People Don’t Invest
Many Americans do not invest in the stock market. Study the graph to learn more about their reasons why.

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According to the survey, what is the most common reason people are not invested in the stock market? Does that surprise you? Why or why not?

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How would you generalize the overarching idea that explains reasons 3, 4, and 5?

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Part II: Investments by Income
You might expect a family’s income to be related to whether they invest in the stock market - and how much. Study the graph to find out.

Notes:
The graph represents families owning any type of investment in the stock market.
“Direct investments” include individual stocks and bonds
“Indirect investments” include mutual funds, retirement accounts, or other managed assets.
“Median holding” refers to how much the median investment is worth in that category.

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What percent of all families own investments?_______ 

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What percent of families earning between $35,000 and $52,999 have investments? _______ %
What is the median value of those investments?_______ 

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Part III: Investments by Race, Ethnicity, and Market Experience
Through a history of oppression, the U.S. has created a racial wealth gap and excluded many people of color from financial systems. Study the graph to learn more about the racial demographics of investors today.

Notes:
New Investors: People who opened investment accounts in 2020 for the first time ever.
Experienced Entrants: People who opened investments accounts in 2020 and had accounts previously
Holdover Account Owners: People who did not open a new account in 2020 but had previous accounts
This FINRA chart focuses on investors who opened taxable investment accounts in 2020. It does not include accounts for retirement or education.

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How does the racial and ethnic composition of holdover account owners compare to national demographics? Refer to the chart below based on U.S. Census data.

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VIDEO: Wealth Distribution in the US
You’ve learned how investments can compound to build wealth. Now, let’s examine how that wealth is distributed within the US. Watch this video and answer the questions.

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What percentage of wealth is owned by the top 10% of families (those with more than $1.22 million)?

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What percentage of wealth is owned by the bottom 50% of families (those with less than $122,000)?

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Were you surprised by the wealth distribution in the United States? Why or why not?

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DESMOS: Growth of Savings vs Investments
We can use exponential functions to explore how money will grow over time. In this activity, you will compare the growth of a savings account and investment account over 30 years. What is one takeaway from this Desmos? (Desmos will be graded separetly.

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All of the following are reasons to invest, EXCEPT…
To minimize the impact on inflation, which causes you to lose purchasing power
To earn a consistent rate of return with lower risk than typical savings accounts
To build wealth by reinvesting your returns and allowing them to compound
To earn higher average rates of return than you would in a typical savings account

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Sandra has $500 in a savings account that earns 1% annual interest. She leaves that money in the account for 5 years. If inflation averaged 2% per year, what happened to the purchasing power of her savings?
It increased
It decreased
It stayed the same
It matched inflation

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What is the benefit of starting to invest early, even with a small amount?
Your investments are likely to grow more since compounding means returns get larger over time
You are guaranteed higher returns since compounding reduces the risks of investing
You can use your investments to meet short-term financial goals since you don’t need to hold them as long
You can take advantage of brokerage discounts for long-term investors

5.1 Why Should I Invest?

Identify whether each of the following statements describes saving (S) or investing (I). Circle or highlight your answers.

Why is investing a more powerful tool to build long-term wealth than saving?

Considering the impact of inflation, why is investing important?

How can compound interest increase your investment’s growth?

According to the video, what are three ways you can harness the power of compounding?

What is the advantage of starting to invest early?

According to the survey, what is the most common reason people are not invested in the stock market? Does that surprise you? Why or why not?

How would you generalize the overarching idea that explains reasons 3, 4, and 5?

How does the racial and ethnic composition of holdover account owners compare to national demographics? Refer to the chart below based on U.S. Census data.

What percentage of wealth is owned by the top 10% of families (those with more than $1.22 million)?

What percentage of wealth is owned by the bottom 50% of families (those with less than $122,000)?

Were you surprised by the wealth distribution in the United States? Why or why not?

DESMOS: Growth of Savings vs InvestmentsWe can use exponential functions to explore how money will grow over time. In this activity, you will compare the growth of a savings account and investment account over 30 years. What is one takeaway from this Desmos? (Desmos will be graded separetly.

Sandra has $500 in a savings account that earns 1% annual interest. She leaves that money in the account for 5 years. If inflation averaged 2% per year, what happened to the purchasing power of her savings?It increasedIt decreasedIt stayed the sameIt matched inflation

Identify whether each of the following statements describes saving (S) or investing (I). Circle or highlight your answers.

Why is investing a more powerful tool to build long-term wealth than saving?

In addition to the price of goods and services, what else is impacted by inflation? (choose all correct answers)WagesSavingsDebtsInterest

If you put money in a savings account earning a rate of return of 1% and inflation is currently at a rate of 2%, will your money be worthMore in the futureLess in the futureExactly the same

Considering the impact of inflation, why is investing important?

How can compound interest increase your investment’s growth?

According to the video, what are three ways you can harness the power of compounding?

What is the advantage of starting to invest early?

According to the survey, what is the most common reason people are not invested in the stock market? Does that surprise you? Why or why not?

How would you generalize the overarching idea that explains reasons 3, 4, and 5?

Based on what you know about saving and investing, what are the disadvantages of having your money in safer accounts, like savings?

The graph illustrates the factors that prevent many people from investing. Hypothesize - what policies or changes might encourage more Americans to invest? Why?

How does income level correlate to the likelihood of having investments? Why do you think that’s the case?

Hypothesize - why does the median holding value jump significantly between families earning under $100,000 and families earning more than $100,000?

How does the racial and ethnic composition of holdover account owners compare to national demographics? Refer to the chart below based on U.S. Census data.

How do the demographics of new investors compare to the demographics of “holdover account owners” who were already invested in the market?

Make a prediction: How do you think the overall demographics of investors will change over time? Why? You may wish to consider information from all three graphs.

Hypothesize: Do you think these changing demographics will decrease wealth inequality in the U.S.? Why or why not? Consider what you’ve learned in all three graphs.

What percentage of wealth is owned by the top 10% of families (those with more than $1.22 million)?

What percentage of wealth is owned by the bottom 50% of families (those with less than $122,000)?

Were you surprised by the wealth distribution in the United States? Why or why not?

Do you think the wealth distribution is fair? Why or why not?

How do you think investing relates to wealth inequality?

DESMOS: Growth of Savings vs InvestmentsWe can use exponential functions to explore how money will grow over time. In this activity, you will compare the growth of a savings account and investment account over 30 years. What is one takeaway from this Desmos? (Desmos will be graded separetly.

Sandra has $500 in a savings account that earns 1% annual interest. She leaves that money in the account for 5 years. If inflation averaged 2% per year, what happened to the purchasing power of her savings?It increasedIt decreasedIt stayed the sameIt matched inflation

In addition to the price of goods and services, what else is impacted by inflation? (choose all correct answers)WagesSavingsDebtsInterest

If you put money in a savings account earning a rate of return of 1% and inflation is currently at a rate of 2%, will your money be worthMore in the futureLess in the futureExactly the same

Based on what you know about saving and investing, what are the disadvantages of having your money in safer accounts, like savings?

The graph illustrates the factors that prevent many people from investing. Hypothesize - what policies or changes might encourage more Americans to invest? Why?

How does income level correlate to the likelihood of having investments? Why do you think that’s the case?

Hypothesize - why does the median holding value jump significantly between families earning under $100,000 and families earning more than $100,000?

How do the demographics of new investors compare to the demographics of “holdover account owners” who were already invested in the market?

Make a prediction: How do you think the overall demographics of investors will change over time? Why? You may wish to consider information from all three graphs.

Hypothesize: Do you think these changing demographics will decrease wealth inequality in the U.S.? Why or why not? Consider what you’ve learned in all three graphs.

Do you think the wealth distribution is fair? Why or why not?

How do you think investing relates to wealth inequality?

DESMOS: Growth of Savings vs Investments
We can use exponential functions to explore how money will grow over time. In this activity, you will compare the growth of a savings account and investment account over 30 years. What is one takeaway from this Desmos? (Desmos will be graded separetly.

Sandra has $500 in a savings account that earns 1% annual interest. She leaves that money in the account for 5 years. If inflation averaged 2% per year, what happened to the purchasing power of her savings?
It increased
It decreased
It stayed the same
It matched inflation

In addition to the price of goods and services, what else is impacted by inflation? (choose all correct answers)
Wages
Savings
Debts
Interest

If you put money in a savings account earning a rate of return of 1% and inflation is currently at a rate of 2%, will your money be worth
More in the future
Less in the future
Exactly the same

DESMOS: Growth of Savings vs Investments
We can use exponential functions to explore how money will grow over time. In this activity, you will compare the growth of a savings account and investment account over 30 years. What is one takeaway from this Desmos? (Desmos will be graded separetly.

Sandra has $500 in a savings account that earns 1% annual interest. She leaves that money in the account for 5 years. If inflation averaged 2% per year, what happened to the purchasing power of her savings?
It increased
It decreased
It stayed the same
It matched inflation

In addition to the price of goods and services, what else is impacted by inflation? (choose all correct answers)
Wages
Savings
Debts
Interest

If you put money in a savings account earning a rate of return of 1% and inflation is currently at a rate of 2%, will your money be worth
More in the future
Less in the future
Exactly the same