© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 1 Chapter 8 LESSON 8.3 Save with Safety Objectives: By the end of class, students will be able to  Describe the benefits and trade-offs of different saving options  Discuss government bonds and some reasons for investing in them

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 2 Chapter 8 Savings Options  Certificate of deposit  A deposit in a savings institution that earns a fixed interest rate for a specific period of time.  Money market account  A deposit for which the interest rate changes over time.

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 3 Chapter 8 Certificate of Deposit  In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand.  Interest rate- Varies by institution  Minimum deposit  Penalty for early withdrawal  Safety

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 4 Chapter 8 Money Market Account  Money market accounts typically have a relatively high rate of interest and require a higher minimum balance (anywhere from $1,000 to $10,000 to $25,000) to earn interest or avoid monthly fees. The interest on a Money Market Account is usually compounded on a daily or monthly basis and paid on a monthly or quarterly basis.  Interest rate  Minimum deposit  Flexibility  Safety

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 5 Chapter 8 Annual Percentage Yield (APY)  Truth in Savings Act  Act that was passed in 1993 that required banks to report their annual percentage yield or APY  APY is the actual interest rate an account pays per year

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 6 Chapter 8 Government Bonds  Treasury securities- a government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt. Treasury securities are the debt financing instruments of the United States federal government, and they are often referred to simply as Treasuries.  Treasury bills- terms of less than one year  Treasury notes- terms that last from one to ten years  Savings bonds  Series EE savings bonds- $50-$10,000  Series HH savings bonds- Bonds traded from EE that had matured  I savings bonds- Bonds whose interest rate rises with inflation

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Slide 7 Chapter 8 Why Buy Government Bonds  1. Tax advantages- Reduces your taxable income.  2. Safe investment- Backed by the Federal Government.

© Thomson/South-Western ECONOMIC EDUCATION FOR CONSUMERS Student Practice/Application  1. Read pages in your Economics textbook.  2. Complete Try These Questions 1-7 on page 271 of your Economics Textbook  3. Complete Think Critically questions 8-9 on page 271 of your Economics textbook  4. Complete Exit Ticket Question Slide 8 Chapter 8