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Semester Course

7.1 Why Should I Invest?

Discussion Prompts

  1. What do you know about investing, and where have you learned about it?

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  • Is investing something you plan to do? Why or why not?

www.ngpf.org Last updated: 8/3/21

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Semester Course

7.1 Why Should I Invest?

Essential Questions

  • How is saving different from investing?
  • What is the advantage of investing early for retirement?
  • How does compound interest work?
  • Why is it important to estimate how much I’ll need for retirement?

Essential Questions

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A 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!

  1. Your 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?
  2. What is the advantage of investing early for retirement?
  3. If investing can bring higher returns, why should you put money in a savings account at all?
  4. What 3 tips would you give someone who is about to invest their money for the first time?

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Compound Interest Explained

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.

  1. Why do you earn more money using compound interest than you would using simple interest?
  2. Does compound interest have more of an impact for short-term investments or long-term investments? Why?

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ANALYZE: Investing for Retirement

I KNOW IT IS A LONG WAY OFF, but retiring on Social Security income alone is extremely difficult, which is why it is vital that people invest for their own retirement. Analyze the three graphs provided in order to learn more about investing for retirement.

  1. Which investor had the highest balance when they turned 65 in this example?

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  • How are the actions of the three investors similar? How are they different?
  • Susan invested $50,000 and Bill invested $150,000. Why did Susan have a higher balance at the age of 65?
  • What important piece of information is missing from this graph?
  • Using the data above, summarize an argument for why you should start investing when you are young.
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  1. What percentage of millennials have $100,000 or more invested for retirement?
  2. How does the fraction of millennials with at least $100,000 in retirement compare to the portion of millennials who have no retirement savings?
  3. Summarize how the amount invested for retirement compares across the three age groups.
  4. Explain why the percentage of people with $300,000 or more increases so substantially across the age groups.
  5. 72% of millennials have between $0 and $9,999 invested for their retirement so far. Why is this a potential problem?

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  1. If you begin investing at age 25 instead of age 20, how much more do you need to invest per month to have $1M at retirement?
  2. Why might some 20-year-olds have difficulty investing $360 per month for retirement?
  3. If you begin investing at age 45 instead of age 40, how much more do you need to invest per month to have $1M at retirement? Why is this amount so much greater than the difference between 20 and 25?
  4. If you wait until you’re 45 to begin investing, how much money will you need to invest, just for retirement, per year? Why might this be difficult?
  5. Using the data in graphs II and III, how much will most millennials need to begin investing, per month, in order to have $1M in retirement? Explain your answer.

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Fun Activity

Select a Partner

You both work for a Mainstay Capital Management and your boss wants you to put together “A One Slide Solution” on convincing a group of 25 year olds who work for Ford Motor company, to begin putting money into their 401K for retirement.

For 20 years, your firm has not done a great job explaining the benefit, but your boss feels confident you and your partner are right for the job. He wants it on his desk in 25 Minutes. Good Luck

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Exit: ANALYZE: Inequalities in Investing - Part 1

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.

  1. 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?
  2. How would you generalize the overarching idea that explains reasons 3, 4, and 5?
  3. Based on what you know about saving and investing, what are the disadvantages of having your money in safer accounts, like savings?

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Part

  1. How do the demographics of new investors compare to the demographics of “holdover account owners” who were already invested in the market?
  2. 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.
  3. 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.