What is your favorite kids book? Why?

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Presentation transcript:

What is your favorite kids book? Why?

The Cost of Borrowing Money It costs you money to borrow money

What do we call the cost to borrow money? The interest rate!

Who raises/lowers interest rates in our country? The Federal Reserve

When interest rates rise… Borrowing money is more expensive People and businesses borrow less money The economy slows down

When interest rates drop… Borrowing money is cheaper People and businesses borrow more money The economy speeds up

Which do you prefer? $100 now or $100 later

The Time Value of Money Money is better to have now if you can save it so that it makes interest E.g. You get $100 now and put it in the bank where it makes 10% interest. Next year, you’ll have $110!

How long do you have to save money to double it? Rule of 72! 72 divided by the interest rate = # years to double money

Types of Interest Simple Interest Interest only paid on the principal (money borrowed)

Types of Interest Compounding Interest Interest earned on interest

Types of Interest Daily/Monthly/Quarterly/Annual Compounding Interest You recalculate interest every day/month/quarter/year Q: Which is best?

Annual Percentage Rate (APR) The interest rate you pay over the whole year Used on credit cards, car loans, home loans, etc.

Annual Percentage Rate (APR) Why is it used? Helps you compare costs of loans

Annual Percentage Yield (APY) The interest rate paid to you over the whole year

Inflation and Interest Rates When interest rates go down, you spend more, causing prices to go up (inflation)

Inflation and Interest Rates When interest rates go up, you spend less, causing prices to go down (deflation)

What makes a good kids book?

Your Task Create a short children’s book that explains one topic from today (interest rates) It must be illustrated. It must be at least 10 pages long. The winning book will become a part of Aurora and Obadiah’s library.