S AVING S ECTION 1 Essential Question: Why should you save? Chapters 10-15

S AVING FOR THE F UTURE Save: Setting aside money to meet future needs/wants Savings should grow to provide for future needs Expected Unexpected Typical savings plans include: Savings accounts Money market accounts Certificates of Deposit

W HY Y OU S HOULD S AVE Short-term Needs: require money beyond what you can cover with your current paycheck Emergencies Vacations Social events Major purchases Long-term Needs: require a lot of money (mainly provided from investments) Home ownership Education Retirement Financial Security: confident and prepared for future household needs and wants

A MOUNT OF SAVINGS DEPENDS ON : Discretionary income amount of money left after bills have been paid Importance/value you place on spending Your anticipated needs and wants lifestyle Your will power ability to plan and stick to budget

H OW Y OUR M ONEY G ROWS Principal: amount of money deposited by a saver Interest: earnings on a savings account Simple interest: interest computed on the amount saved only Compound Interest: interest computed on the original principal plus interest already earned Annual Percentage Yield (APY): the actual interest rate an account pays per year, with compounding calculated

C OMPOUNDING I NTEREST A NNUALLY Beginning InterestEnding YearBalanceEarned (6%)Balance 1 $100.00$6.00 $

C OMPOUNDING I NTEREST Q UARTERLY Quarterly Compounding Annual Interest Rate = 6% BeginningQuarterlyQuarterly Interest Ending YearBalanceInterestQ1Q2Q3Q4Balance 1$ $1.50$1.52$1.55 $1.57 $

W HERE Y OU C AN S AVE Commercial banks Savings banks Savings and loan associations Credit unions Brokerage firms