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Course: Financial Literacy > Unit 7
Lesson 1: Introduction to saving and investing- Real world: The Case of the Early Bird
- Saving and investing
- Why save and invest
- How financial institutions and markets facilitate saving and investing
- The types and functions of financial institutions and markets
- Financial institutions and markets, their roles and services
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Saving and investing
Saving and investing help you reach your short-term and long-term goals by putting money aside for things like emergencies, going to college, buying a house, or retiring. By planning and saving money, you make sure you have enough for what you need and want in the future. Created by Sal Khan.
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Video transcript
- Let's talk a little bit
about saving and investing. So one theme that you'll
hear me talk a lot about is how important it is to save. One, it's a sign that
you're living sustainably, that you're spending less
money than you're bringing in. And it also allows you to build a cushion if anything bad were to happen,
if you were to lose your job or there's some medical
expenses that are unforeseen or whatever it might be,
having that extra cushion is going to be really, really helpful. Really helpful. It's gonna lower your stress
level in a lot of ways. The other valuable thing
about savings is it allows you to do certain things
that you wouldn't be able to do if you didn't have it. For example, put a down payment on a car or buy a car outright or put
a down payment on a house. You need to save your
money in order to do it. And that last category of buying
a down payment on a house, one, it might allow you to
live in the house that you want but you can also view that as
you're making an investment. You're buying a real asset in real estate. And not only is by buying that asset you will save on rent in the future but the house itself might appreciate. And so savings allows you to also invest. Obviously you could buy a house, you could buy rental properties,
other forms of real estate. You could buy stocks and bonds. Bonds you're essentially
lending money to some group. You could buy Treasury
bills, Treasury bonds. That's essentially lending money to the US federal government. You'll get better interest
on that than if you just kept your money in a
checking or savings account. And a lot better interest than
if you just put your money, stuffed it in the mattress
where you'll get no interest. But if you wanna take on more
risk you could buy stocks. Stocks are you're buying
shares of a company. And a lot of folks will say, "Oh, you'll get better return there." But there's also more risk there. Stocks can go up and
down pretty dramatically depending on what's
happening with the economy, depending on how people
are valuing these things. But the bottom line is
savings is a great start. It builds a cushion and then
you can use those savings and you can think about how
you might want to invest it. When you invest, you should never think that you're gonna get a high
return without any risk. There's usually a bit of a catch there. But investing is a way that
if you invest prudently, you should over time hopefully bring in more money than you are putting in. And so one way to think
about that is you're taking your savings and you're getting
your money to work for you, for your money to create
income that you yourself don't even have to work
in order to produce. So if you save enough money
and you keep investing it in thoughtful ways that aren't too risky, that money will grow and
eventually might be able to create more income
than you can on your own. So it's a pretty good place
to be if you can get there.