1. Savings and Investing Personal Finance Unit 3

2. Savings Accounts A.Regular Savings Account (Passbook) 1.May be a minimum deposit required to open ($100) 2.Small monthly service charge 3.Lowest interest rates 4.High liquidity (closest account to a checking/demand)

3. Money Market Accounts 1.Higher interest rate than passbook 2.Minimum balance required to earn higher rate (usually between $1000 and $2500) 3.Fairly liquid (could be up to a one-week wait for your money) 4.Limited number of check (withdrawals) per cycle 5.Fee charged if you fall below the minimum required balance or write more than maximum number of checks allowed

4. Certificates of Deposits (CDs) 1.Deposit lump sum for a set period of time (90 days-5 years) 2.Withdraw only at maturity date or pay large penalty 3.Higher interest rate that doesn’t change once set (based on the length of deposit time)

5. Individual Retirements Accounts (IRAs) 1.Special tax deferred accounts (pay the taxes at retirement, based on retirement income amount) 2.Money cannot be used before you turn 59 ½ unless of hardship 3.Penalties apply for early withdrawal

6. Types of Investments A.STOCK—buying ownership in a corporation by buying shares 1.Exchanges—NASDAQ, NYSE, AMEX 2.Chance of higher rate of return or loss (risk of reward) 3.Most stocks are purchased through a broker and they charge commission when you buy and sell your shares 4.Many online brokerages now exist. Online stock purchase works just like paying a bill online.

7. Types of Investments B.MUTUAL FUND—pool of money used by an investment company to buy a variety of stocks or bonds 1.Provides for diversification (when one might be losing, another might be gaining) 2.Same risks as stock market 3.Different funds have different goals (growth, income) 4.Different funds have different objectives (entertainment, health care, single foreign country, etc.)

8. Rule of 72 The Rule of 72 is a process where one can compute when money (or debt) will double at a given interest rate. It’s called the Rule of 72 because at 10%, money will double every 7.2 years. Divide 72 by your interest rate to get the amount of time it will take to double your money. How long will it take your money to double at 12%? 6 years How long will it take your money to double at 6? 12 years

9. WHAT DOES IT TAKE? Responsibility Discipline (Habit) Plan Delayed Gratification HOW CAN YOU DO IT? Auto Transfer Unexpected Income (bonus, gifts) Spare Change