KEY TERMS

Welcome to RTSWS Session #4!

• Be sure you have a pen, pencil or writing utensil • Grab a snack • Get ready to share your name, grade and favorite beverage

RTSWS COHORT NORMS

Let’s review our RTSWS cohort norms. These are the expectations for our RTSWS sessions that we set during session #1.

Norms: The behavioral expectations or rules of the class. Class norms inform us how we are expected to behave towards each other and towards the materials we use.

• Come prepared to be a part of RTSWS with your handbook, a writing utensil and a positive attitude.

• Be kind and encourage one another - we are all in this together!

• Ask questions, share your opinions and let the volunteers know when you do not understand something.

LET’S GET STARTED!

Today’s Guiding Questions:

How does a person’s risk tolerance impact their investment decisions? How are interest rates calculated and what are the differences between simple interest and compound interest?

How does stock market volatility impact investors’ decisions and their investments?

SESSION #4 AGENDA:

1. Welcome 2. Attendance 3. Norms 4. Review Agenda 5. What is Risk Tolerance and Why is it Important? 6. Stock Market Review 7. Project Work Time: Financial Planning for Janella 8. Whole Group Reflection 9. Reminders for Next Session

Think About It! Think About It!

Have you ever heard the phrase, “have your money work for you.”

Janella’s younger sister, Julia, recently received some money on her birthday. She wants advice about the best way to have her money work for her. She wants to pick the best way for her to make more money.

Her friend told her, “Buy a lottery ticket. It may be a longshot, but you don’t have to spend much and you could become a millionaire.”

Her grandmother said, “Hide it in a safe place in the house so you’ll always have it on hand for emergencies.” (continued)

Her cousin advised her to, “Buy stock in a technology company. Silicon Valley companies are always in the news.”

Janella told her, “Put it in a savings account. It’ll earn compound interest over time, so you’ll have more than what you started with.”

1. Who gave the best advice? Why?

2. Who gave the riskiest advice? Why?

Let’s discuss a few new key terms and determine how they may impact Julia’s decision for having her money work for her.

KEY TERMS

Investment Risk: The chance of losing all or part of the value of an investment.

Risk Tolerance:

The amount of risk that an investor is comfortable taking or the degree of uncertainty that an investor is able to handle.

An individuals’ risk tolerance is based on a number of factors including age, financial stability and amount of time before invested funds are needed for other purposes.

KEY TERMS

Interest:

The cost of borrowing money. In other words, you are paying a certain amount for the use of borrowing money. Interest is expressed as a rate, such as 3%. When you lend or invest money, a higher interest rate is better because it means you earn more. When you borrow money, a lower interest rate is better because it means you pay less.

Simple Interest

A set rate on the original amount lent to the borrower. The borrower will have to pay this interest.

Example: If you borrow $1,000 (Principal) with 10% interest annually, the interest owed will be $100 ($1,000 x 10% or .10 = $100). If you’ve paid nothing on the loan after one year you will owe $1,100.