Finance is Often filled with intimidating jargon and terms
Language like “compound interest” or “diversification” can be overwhelming and unfamiliar to students. This creates a barrier to learning essential financial skills, leaving many youth unprepared to manage money confidently in the real world.
Our Mission
Simplify these terms so that you can become more financially literate and make passive income (make money without active work) no matter what field you choose to go into.
Module 1: Understanding Assets and Investments
INVESTMENTS VS. ASSETS
Assets are anything of value that can be converted to cash and an investment is a type of asset.
Investments are different as they are things that you expect to increase in value over time.
Sort each category into either an asset or investment
Everyday Furniture
Electronics
Everyday Clothing
Cryptocurrency
Real Estate
Collectibles
ASSET
INVESTMENT
3 Main Asset Classes
equities (stocks)
fixed income (bonds)
cash alternatives (savings)
Different investments have different risks and consequentially, different returns (how much money you make!). The riskier something is, the more opportunity for profit but also large losses. Cash alternatives are the least risky, then fixed income, and then equities.
Risk Ranking Challenge
There are 3 main types of asset classes: equities (stocks), fixed income (bonds), and cash alternatives (savings). Different investments have different risks and returns!
Rank by risk profile from highest to lowest risk:
The Rule of 72
To make return rates easier to understand, you can use the helpful Rule of 72!
Formula: 72 ÷ rate of return = years to double your money
The rule of 72 lets you estimate how long it will take you to double your investment.
*rate of return = net gain or loss of investment over time in percent
Example: Stocks generally give you an estimated 10% return on investment (calculated based off of the S&P500 or performance of top 50 companies in the USA).
Calculate with Rule of 72
A bond gives you back 4% interest/return. How long will it take to double your money?
Module 2: Security & Return Liquidity
3 Basics of investing
There are many things to consider when investing
Security is related to what level your investment is protected at (essentially risk).
Return is how much you expect to earn from that certain investment.
Liquidity relates to how easily you can cash out/ turn liquid your investment.
Fill in the blank: Security is related to what level your investment is ______.
Cash Alternatives & Liquidity
The most liquid out of the 3 main asset classes are cash alternatives. Savings can be protected by the FDIC (Federal Deposit Insurance Corporation) for up to $250,000 (essentially backed by the government) and offer steady, low income to combat inflation.
FDIC can insure for up to:
Within this asset class we have savings accounts, money market accounts, and certificates of deposits. Saving accounts offer low interest rates back to you by putting your money into a bank.
Savings accounts loan your money directly to:
Money market accounts are a type of saving account that can earn you a higher interest rate but have a higher minimum balance required. A certificate of deposit is another type of savings account that gives you a fixed interest rate (rate doesn’t change over time) but you put away that money for a set period of time (aka a term). The interest rates of a certificate of deposit is also typically higher than traditional savings accounts.
Fill in the blank: A term is the ______ of an investment.
Module 3: Cash Alternatives
Now let's learn about another asset class! An example of fixed income are bonds. Bonds require you to loan out money to a company or the government.
Lending money to a ______ is less risky:
While bonds are not protected from loss, they are more stable than stocks. The capital appreciation (value of the asset) is not why people invest into bonds. Instead, people invest into bonds for the passive income that it offers.
Bond Terminology Matching
Owners of bonds are issuers and the individual who is borrowing the money is the borrower
Scenario: Matilda lends money to the U.S. Treasury.
Match the roles:
The principal refers to the base amount of money given and maturity refers to the end of the deal. With bonds, you will get regular interest payments back until your bond matures.
Bond Calculation
A bond has a principal of $10,000 with 4% annual return. After 2 years, how much will you have earned (excluding principal)?
Bonds for different companies can offer different return rates depending on risk. Bonds are ranked/graded based on how risky they are. High risk means higher return but also higher losses. There are different systems but bonds are rated by an alphabetical system (A being the best and ending at D).
🎓 Final Knowledge Check!
Which investment type typically offers the highest potential returns but also the highest risk?
Congratulations!
You've completed your Financial Literacy Quest! You now understand the basics of assets, investments, and the three main asset classes.
Remember: Financial literacy is the key to building wealth and achieving your goals!
