• Accidents, lost/stolen items, car repairs • Lost job/laid-off
_______
• Car, furniture, house
_______
• College education, house
Saving strategies
_______
• Save by the numbers • Percentage of Net Pay
_______
• Payroll deductions • Checking account transfers
Difference between checking and saving
• Checking Accounts:
_______ _______ _______ _______
• Savings Account:
_______ _______ _______ _______
What is interest?
•_______
• They are “thanking you” for keeping your money in their financial institution.
•_______
Liquidity = _______
Certificate of Deposit = _______
• Typically require a _______ or more for a specific period of time.
• The larger the deposit and the longer the term of the certificate, the higher the interest rate paid. Example: if you deposit $1,000 for 1 year, you will be paid a lower rate of interest than you would if you deposited $1,000 for 2 or 3 years.
• There are _______ for early withdrawal.
Money Market Account = _______
• Require a much _______ than statement savings accounts ($1,000 and up).
• _______ rate of interest.
• May also require larger withdrawal amounts ($500 and up) and _______ per month.
APY stands for _______.
• _______
• All banks must calculate and report this rate in the same way.
Simple Interest is_______.
• Suppose you deposit $100 in an account that pays 6% simple interest per year. At the end of the year, the bank will pay you $6
• Principal x Rate x Time = Interest
$100 x 0.06 x 1 =$6.00
You new balance would be $106 ($100 deposit + $6 interest = $106)
Compound Interest is_______ assuming that the interest is left in the account.
Interest can be compounded in several ways:
• Annually: every year
• Semiannually: every six months
• Quarterly: every three months
• Monthly
• Daily
• Most banks compound _______ , sometimes stated as _______ .
• Your interest rate is calculated and added to your principal each day.
• Then, the next day your interest rate is calculated on the new principal.
• Therefore, you get interest on the previous day’s interest.
Make sure you understand how compound interest works by studying this example.