Question Number of Yes Responses How many of you know that smoking is unhealthy? How many of you know people who smoke? How many of you know that eating food that are high in fat content, such as fast foods and packaged snacks, isn’t healthy? How many of you know people who eat foods that are high in fat content? How many of you know that regular exercise provides many health benefits? How many of you know people who don’t exercise regularly?

 Costs are all the things that have to be given up when a choice is made.  Costs are negative.  Benefits are any gains or favorable outcomes that make people more satisfied when a choice is made.  Benefits are positive.

 What are the benefits of eating a healthful diet and exercising regularly?  Do these benefits of diet and exercise occur now or in the future?  If people choose a healthful diet and exercise regularly, are they guaranteed these benefits? Can they count on them for sure?  What are the costs of choosing a healthful diet and exercising regularly?

THE BENEFITS OF BUYING SOMETHING ARE IMMEDIATE, THE BENEFITS OF SAVING ARE NOT. THE CONSEQUENCES OF SAVING ARE IMMEDIATE, THE CONSEQUENCES OF BUYING SOMETHING ARE NOT. WHAT DOES THIS MEAN? WE PREFER INSTANT GRATIFICATION TO DELAYED, THAT’S WHY SAVING MONEY IS SO HARD.

Interest: How is interest calculated? COMPOUND INTEREST is the accumulation of money where the interest earned remains in the account to earn additional interest in the future. In other words, you earn interest on your interest. The equation for compound interest is: Total = Principal (1 + rate) years

Interest: How is interest calculated? The equation for compound interest is: Total = Principal (1 + rate) years Lets say you have $20,000 to invest at 7% interest. How much money will you have in your account at the end of 5 years? Total = (1 +.07) 5 This result is a total of $28, at the end of 5 years.

Interest: How is interest calculated? The equation for compound interest is: Total = Principal (1 + rate) years Lets say you have $20,000 to invest at 7% interest. How much money will you have in your account at the end of 5 years? This result is a total of $28, at the end of 5 years. Now calculate the same problem for 10 years and 20 years. Did you get $39, for 10 years? Did you get $77, for 20 years?

Interest: How is interest calculated? Compound interest can be further complicated by the number of times PER YEAR the interest is calculated. For example, is the interest calculated bi-yearly or twice per year? Is the interest calculated quarterly or four times per year? The following table shows the final principal (P), after t = 1 year, of an account initially with C = $10000, at 6% interest rate, with the given compounding (n). 1 (yearly) $ (semiannually) $ (quarterly) $ (monthly) $ (weekly) $ (daily)$

Interest: How is interest calculated? The Rule of 72 ……states that 72 divided by the interest rate will result in the number of years it will take your investment to double…...

Interest: The Early Bird Gets the Worm How interest rates affect your Return on Investment (ROI)

Interest: The Early Bird Gets the Worm How interest rates affect your Return on Investment (ROI)

Interest: The Early Bird Gets the Worm Mary and John graduate from college in the same year. Starting at age 22, Mary invests $2000 per year for 7 years and stops. John sees that Mary has saved a lot of money and begins investing $2000 per year at age 29 and continues for the next 33 years. Who will have the most money with which to retire at age 62?

Interest: The Early Bird Gets the Worm Mary’s investment of $14,000 resulted in $628,329 when she reached age 62. John’s investment of $66,000 resulted in $600,082 when he reached age 62.

Saving Money Important ideas to keep in mind: Set goals for saving (stereo, car, home, retirement) Let the magic of compounding work for you Save BEFORE you spend Direct deposit can make saving easier (out of sight, out of mind)

 People who save usually have savings goals. These are aims or desired results that people hope to achieve.  Short-term savings goals are those that can be achieved in one year or less.  Medium-term savings goals are those that can be achieved in one-to-five years.  Long-term savings goals require more than five years to achieve.

Short-Term Savings Goals Medium-Term Savings Goals Long-Term Savings Goals

The market for loanable funds is the market where those who want to save supply funds and those who want to borrow to invest demand funds.

The interest rate is the price of the loan. It represents the amount that borrowers pay for their loans and the amount that lenders receive on their savings.

 Supply comes from those that have extra money to save or lend out  This lending can occur directly through the purchase of a bond or indirectly as savings  High interest rates making saving more attractive

 American families, in comparison to Japan and several other wealthy nations, save a smaller portion of their income.  Saving is an essential long-run determinant of a country’s productivity.  If the United States increased its savings rate, then the growth rate of GDP would also rise.

Many economists believe that one cause of the low savings rate is tax laws that discourage saving. The tax on interest income reduces the future return from current saving and leads to less incentive for saving.

Increasing interest rates in Europe might lead investors to pull their cash out of the U.S. financial system.