1. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved1 Introduction It is critical you understand what Interest is and how it works Most major purchases involves Interest You will need Interest to be able to retire Interest can work for and against you Maximize the times Interest is working for you Minimize the times Interest is working against you

2. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved2 Objectives Define interest, interest rate and period interest rate You should be able to do the following after completing this lesson Describe how interest can work for and against you Explain how banks use interest to make money List the common interest calculation periods Discuss how interest will affect your life Identify what you would not be able to do without interest Summarize the affect time has on interest List the component parts of a loan

3. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved3 3.1.1 – Why Worry About Interest? Why interest is powerful in both positive and negative ways In this section, you will learn: What you wouldn’t be able to do without interest What the most important thing interest can do is Why you will need interest to be able to retire Why it is essential for you to understand interest

4. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved4 3.1.2 – How do Banks use Interest? Why a bank is a great example of the power of interest How banks make money using interest In this section, you will learn: How a bank uses interest to attract customers

5. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved5 3.1.3 – What is the Interest Rate? In this section, you will learn: What the interest rate is and how it is defined Bank XYZ Example What the interest rate is used for What happens to the interest when the interest rate increases or decreases You will run the following Interactive Example:

6. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved6 3.1.4 – Specifying Interest Rates In this section, you will learn: How the interest rate is specified What the Period Interest Rate is How to use the following formula to calculate the Period Interest Rate Why you might need to calculate interest more frequently than annually The common intervals for calculating interest PIR = AR ÷ P

7. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved7 3.1.5 – How Time Affects Interest In this section, you will learn: The affect time has on interest calculations What the 2 components of a loan are What compounding is Why the growth of interest is not linear How you can use interest, time and compounding to increase your personal wealth

8. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved8 3.1.6 – The Importance of Interest In this section, you will learn: Power of Interest Example Several ways to increase your personal wealth What the only reliable and proven method of increasing personal wealth is What 2 things are necessary to increase your personal wealth You will run the following Interactive Example: How the interest rate and time affects money in interest-bearing accounts

9. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved9 3.1.7 – Interest Can Work Against You In this section, you will learn: Working Against You Example What you should do when you find yourself in a hole When interest is working against you You will run the following Interactive Example: Examples of when interest is working against you What a credit card is How credit card debt works against you

10. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved10 3.1.8 – Increasing Wealth with Interest In this section, you will learn: Why someone might not believe they can use interest to increase their personal wealth About the keys to using interest to increase personal wealth Why you should maximize the times interest is working for you Why you should minimize the times interest is working against you

11. Lesson 3.1 Interest Basics February 15, 2011Copyright © 2007-2011 … REMTECH, inc … All Rights Reserved11 Discussion Questions Does every purchase you make involve interest? Can you really use the concept of interest to become wealthy?