1. 3-3 SAVINGS ACCOUNTS
Smart money management includes saving a portion of your income and making wise long-term investments.

2. 🔗🔗 Find out more about savings options here 2
JA Finance Park Saving, Investing, and Risk Management 🔗🔗
Find out more about savings options here 2

3. BOND: An IOU issued by a company, municipality, or the federal government in exchange for a loan from an investor that will be repaid with a set rate of return.
CERTIFICATE of DEPOSIT: Certificate that states there is a specific sum of money on deposit and guarantees the payment of a fixed interest rate after a certain of time (7 days to 10 years); deposits and withdrawals cannot be made.
INTEREST: A fee received or paid for the use of money.
PAY YOURSELF FIRST (PYF): To automatically save a specified amount from a paycheck for future use. $ $ $
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4. MONEY MARKET ACCOUNT: Account that pays a higher interest rate than other types of accounts but usually requires higher initial deposit and higher minimum balance; often with limit on the # of transactions per month.
MUTUAL FUND: A collection of stocks or bonds of various corporations.
PRINCIPAL: The amount of money originally invested.
SAVINGS ACCOUNT: An interest-bearing account where people put money for future use.
STOCK: A share of a corporation sold to the public. $ $ $
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5. Pay Yourself First
Money experts tell us that a good rule of thumb is to save 10 to 20 percent of any money we receive. When you Pay Yourself First, you automatically save a portion of your paycheck for future use.

6. How much money do you really need in your savings account?
Video!

7. Short-Term Options Long-Term Options
Savings account
Certificates of deposit
Money market account
Long-Term Options
Bonds
Stocks
Mutual funds
401(k) retirement account
JA Finance Park Saving, Investing, and Risk Management

8. Every investment has risks and rewards, which a smart investor must evaluate and weigh.
JA Finance Park Saving, Investing, and Risk Management

9. Risk of loss of principal
Type
Maturity
Risk of loss of principal
Yield
Minimum
Savings Account
None
Low: insured
Low
$0/–$25 (varies)
Certificates of Deposit (CDs)
90 days up to 5 years
$50–$500
Money Market
Account
$50–$2,500 +
Bonds
1–5 years +
Medium
Moderate
$1,000–$5,000
Stocks
Long term
Medium–high
Moderate–high
Varies
Mutual Funds
Low–high
$1,000 or higher
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10. Years to double = 72 / Interest Rate
Rule of 72
The rule, really more a general guideline, says that to find the number of years required for money to double at a given interest rate, divide 72 by the interest rate. Today, most banks offer an interest rate of less than 1 percent. Do NOT convert the percent to decimal!
Years to double = 72 / Interest Rate
Example: How long will it take for an investment to double at 12% interest rate.

11. Simple Interest Formula
I = prt

12. EXAMPLE 1
Mitchell deposits $1,200 in an account that pays 4.5% simple interest. He keeps the money in the account for three years without any deposits or withdrawals. How much is in the account after three years? 12

13. EXAMPLE 2
How much simple interest does $2,000 earn in 7 months at an interest rate of 5%? 13

14. EXAMPLE 3
How much principal must be deposited to earn $1,000 simple interest in 2 years at a rate of 5%? 14

15. EXAMPLE 4
Derek has a bank account that pays 4.1% simple interest. The balance is $910. When will the account grow to $1,000? 15

16. EXAMPLE 5
Kerry invests $5,000 in a simple interest account for 5 years. What interest rate must the account pay so there is $6,000 at the end of 5 years? 16

17. PRACTICE
1) How much simple interest is earned on $4,000 in 3½ years at an interest rate of 5.2%?
2) How much simple interest would $800 earn in 300 days in a non-leap year at an interest rate of 5.71%? Round to the nearest cent.
3) How much principal must be deposited in a two-year simple interest account that pays 3¼% interest to earn $300 in interest?
4) Marcos deposited $500 into a 2.5-year simple interest account. He wants to earn $200 interest. What interest rate must the account pay? 17

18. Practice: p135, #8
Ryan deposits $775 in an account that pays 4.24% simple interest for four years. Brian deposits $775 in an account that pays 4.24% simple interest for one year.
a. What is Ryan’s interest after the four years?
b. What is Ryan’s balance after four years?
c. How much interest did Ryan’s account earn the first year?
d. How much interest did Ryan’s account earn the fourth year?
e. What is Brian’s interest after the first year?
f. What is Brian’s balance after the first year?
g. Suppose Brian withdraws all of the principal and interest after the first year and deposits it into another one-year account at the same rate, what is his interest for the second year? Round to the nearest cent.
h. Compare the interest Brian earns with the interest Ryan earns for
the second year. Who earned more interest? Explain.