1. Financial Literacy BCS-FL-8
Students will evaluate savings and investment options to meet short-term and long-term goals.

2. 3 reasons why You should save
Short-term needs
Can’t always predict these-need to have money in savings
Emergencies
Vacations
Social Events
Major purchases

3. 3 reasons why You should save
Long-term needs
Home ownership
Down payment
Education
High cost=more $
Retirement
SS never enough
Investing- bonds, mutual funds, real estate

4. 3 reasons why You should save
Financial security
This is “peace of mind” knowing that you have enough money to cover day to day expenses and emergencies.
The amount of Money you save will vary based on several factors
Discretionary income
Importance you attach to savings
Your anticipated needs and wants
Your will power or ability to give up present spending in order to provide for your future.

5. How Your Money Grows Principal Interest Compound interest
The amount of deposited
Interest
The amount the bank pays the saver
Compound interest
The interest calculated on the original “principal” plus additional interest.
The more often interest is compounding the more you make…. Hence daily compounding will make you more money than monthly or yearly.
Annual Percentage yield
Required by law

6. How Your Money Grows Rate of return=Yield Annual Percentage yield
The percentage increase in the value of your savings due to earned interest.
Annual Percentage yield
Required by law
Calculated the same way by all financial institutions
You can use APY to easily compare the yields on different accounts.

7. Compounding Interest Annually
Beginning Interest Ending
Year Balance Earned (5%) Balance
$ $ $105.00
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8. Compounding Interest Quarterly
Quarterly Compounding
Annual Interest Rate = 6%
Beginning Quarterly Quarterly Interest Ending
Year Balance Interest Q1 Q2 Q3 Q4 Balance
1 $ $1.50 $1.52 $ $ $106.14
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9. Compounding Interest and Making Additional Deposits
Beginning Interest Ending
Year Balance Deposits Earned (5%) Balance
1 $ $ $ $105.00
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10. Where You Can Save Commercial banks Savings banks
Savings and loan associations
Credit unions
Brokerage firms
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11. Commercial banks Wide variety of banking services
Most are insured through the Federal Deposit Insurance company FDIC. Up to $ (used to be $ )
Ex Wells Fargo, BOA
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12. Savings Banks Also known as Mutual Savings Banks
Only about 500 in the US
Provide savings accounts and mortgages and home improvement loans.
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13. Savings and Loans Associations
Lend mortgage money and offer savings accounts at a little bit higher rate
Insured by FDIC
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14. Credit Unions Not for profit organizations Created by “groups”.
Ex teachers credit union
Lower rates on loans
NCUA can insure up to $
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15. Brokerage Firms
These companies buy and sell different securities (EX Stocks, bonds)
You use a stockbroker who works for the firm to buy things from them
Ex. Merrill Lunch Brokerage firm
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16. Lesson 10.2 Savings Options, Features, and Plans
Explain the features and purposes of different savings options.
Discuss some factors that influence the selection of a savings plan.
Explain at least two ways to save regularly.
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17. Savings Options Regular savings account Certificate of deposit (CD)
Money market account

18. Savings Options Regular savings account Higher liquidity
Lower interest rate
May pay fee if you make to many withdrawals or if it falls below a certain set amount.

19. Savings Options Certificate of deposit (CD)
Earns fixed interest rate for a fixed amount of time
Requires a minimum deposit
Usually slightly higher interest rate than regular savings account
Maturity date
Penalty for early withdrawal

20. Savings Options Money market account
Combination savings-investment plan
Money can be withdrawn without a fee
Money is used to purchase safe liquid investments
Money market accounts with Brokerage firms are not insured by FDIC
Money market accounts with some banks are FDIC insured
Usually require minimum balance
Variable interest rate which goes up and down with the stock market.

21. Selecting a Savings Plan
Liquidity
How quickly you can convert to cash
Safety
How safe is your money (FDIC)
Convenience
How easy is it for you to get to your bank?

22. Selecting a Savings Plan
Interest-earning potential (yield)
Earn as much interest as possible while maintaining liquidity, safety and convenience your looking for.
Fees and restrictions
Withdrawal Restrictions
Minimum Balances
Service Charges
Fees

23. Saving Regularly Ways to make saving easier:
SAVE as MUCH as you can as FREQUENTLY as you can!!!!!!
Ways to make saving easier:
Direct deposit
Automatic payroll deductions
Taken out of paycheck and deposited in savings account.
Payroll savings Plan
$ taken out of each paycheck and deposited into an account to buy government savings bonds.