3.9 Where to Save

Instructions

OBJECTIVES & STANDARDS
Math Objectives
Explore compound interest equation
Compare exponential and linear growth outcomes
Distinguish between situations that can be modeled with linear functions and with exponential functions.
Common Core Math Standards
Link to all CCSS Math
CCSS.PRACTICE.MP2
CCSS.PRACTICE.MP4
CCSS.HSF.LE.A.1
CCSS.HSF.IF.B.5
CCSS.HSA.REI.B.3
Personal Finance Objectives
Explain the difference between banks and credit unions
Understand the difference between a checking and savings account
Compare different types of savings accounts with their costs and benefits
Explore alternatives to a traditional savings account
Investigate modern saving apps that can integrate into a personal savings plan
National Standards for Personal Financial Education
Saving
2a: Select a preferred location for a savings account based on comparison of interest rates and fees at different types of financial institutions.
4b: Illustrate how inflation can reduce the purchasing power of savings over time if the nominal interest rate is lower than the inflation rate.
DISTRIBUTION & PLANNING
Distribute to students
Student Activity Packet

VIDEO: Banks vs. Credit Unions: What's the Difference?
Watch the video and answer the following questions. Compare your answers with a partner and discuss any similarities and differences.

1

What are the three main categories where banks and credit unions differ?

1

Describe the differences in one of these categories.

1

Does a bank or a credit union fit better with your own personal ideas of what you’d like out of your banking institution? Why?

VIDEO: What's the Difference Between Checking and Savings?
You may be tempted to think you’re all set once you have a checking account, but it’s important to have a savings account, too. Watch this video and then answer the following questions.

1

What is one way banks make money, according to the video?

1

Why can banks offer you interest on your savings account but not your checking account?

1

Would you expect someone earning more than they spend to keep the majority of their money in a checking account or a savings account for the long term? Why?

INFOGRAPHIC: What is the Difference Between Checking and Savings Accounts?
Checking and savings accounts are both important tools for managing your money, but they are used for very different purposes. Read through this infographic for further details about how these accounts are different. Then, answer the questions.

1

How does the interest rate compare between checking and savings accounts?

1

What is one fee with a savings account that you do NOT have with a checking account?

1

Up to what value does FDIC insurance cover your deposits?

1

ACTIVITY: COMPARE: Types of Savings Accounts
Now that you know the difference between checking and savings accounts, let's take a closer look at different types of savings accounts. 
There are multiple types of savings accounts that can help you meet your savings goals. You’ll explore and compare four different types of savings accounts in this activity by first researching the basics of the accounts, then comparing which of those accounts a specific bank or credit union offers, and finally applying what you have learned about those accounts to various saving goal scenarios!

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Part I: Research Savings Accounts
TEAMWORK: Your teacher will assign you one of the four types of savings accounts to research: (1) Traditional Savings Account, (2) Online Savings Account, (3) Certificate of Deposit, or (4) Money Market Account. With your teammates, conduct online research on your assigned savings account type. Complete each field in the drawing below.

0

1

VIDEO: EdPuzzle: Is the Savings Account Dead?
Watch this EdPuzzle video (up to the 5:05 mark) and answer the questions about savings accounts and wealth building.Watch this video to learn more about the role of savings accounts. Then, answer the questions either in EdPuzzle or below.

1

ARTICLE: Best Money-Saving Apps
If savings accounts and CDs are a thing of the past, then what ARE people using nowadays? Often in today’s digital society, consumers do not interact as much directly with their banks but instead use other apps to track and manage their finances.
Pick one of the three apps in the article and fill out the following table. Fill in the rest of the table and answer the questions as you share out with the class.

0

Pick one of the three apps in the article and fill out the following table. Fill in the rest of the table and answer the questions as you share out with the class.

0

How could paying for an app like one of these possibly help you save money?

0

What are some alternative ideas you could use for free?

Now that you know the basics of savings accounts and earning interest, answer the following questions about saving, interest growth, and how your money grows in different accounts.
Part I: Checking Account Balances
Phillip has two accounts where he is storing his money. He has zero interest checking accounts and has met all the minimum requirements to have zero fees. The Account at Bank A starts with $300 and saves $20/month. The Bank B account starts with $100 and he deposits  $1/day. Assume every month has 30 days.

6

How much money will the accounts have after 1 month? After 1 year? After 10 years?
                1 Month  1 Year  10 Years
Bank A: _______ _______ _______ 
Bank B: _______ _______ _______ 

2

1

When will the accounts have the same balance?_______ months

1

2

1

Part II: Compounding Interest
Phyllis (Phillip’s sister) has also learned good saving habits, but she wants to know what different savings accounts will help her earn. She invests $3000 in each of three different savings account types each with different interest rates as shown below.

You will use this compounding interest formula to calculate how much her money will earn in each of the accounts based on the interest rate (r) as a decimal and time (t) in years. For each different account, you will change the variable for interest rate (r) and time (t). For one month, use 0.083 years.

9

How much money will the accounts have after 1 month? After 1 year? After 10 years?
            Interest 1 Month 1 Year 10 Years
Saving @ .005_______ _______ _______ 
$Mark@.0055_______ _______ _______
CD@.0075        _______ _______ _______  

3

How much did the money grow in each bank account from just interest over 10 years?
Savings:_______ 
Money Market:_______ 
CD:_______ 

1

Part III: Simple vs Compound Interest
Philomena, trying to get more growth from her money, is deciding between two investment accounts for her $1050. The Red account predicts a 5% interest compounded annually and a $1050 starting balance. The Blue account guarantees a 7.5% simple interest added annually and a one-time $50 fee making it a $1000 starting balance. Below are the two accounts plotted on the same graph.

1

Which earns more after 5 years?

1

5

1

Which statement about saving is true?
Savings accounts have had about the same interest rates throughout history
Every savings account is the same except for the interest rate they offer
Savings accounts differ wildly and it is worth hours of research to choose the best one
Savings accounts are largely similar and your choice is mostly personal preference

1

This type of account features a low to modest interest rate, requires that you not withdraw your funds for a set period of time, and can be set up at most major banks and credit unions.
1 Checking Account
2 Savings Account
3 Certificate of Deposit
4 Money Market Account

1

Which statement about savings accounts is true?
Savings accounts typically pay lower interest than checking accounts
Savings accounts are insured by the FDIC but checking accounts are not
Savings accounts are for building wealth while checking accounts are for spending
Savings accounts often have transaction limits but checking accounts are unlimited

3.9 Where to Save

What are the three main categories where banks and credit unions differ?

Describe the differences in one of these categories.

Does a bank or a credit union fit better with your own personal ideas of what you’d like out of your banking institution? Why?

What is one way banks make money, according to the video?

Why can banks offer you interest on your savings account but not your checking account?

Would you expect someone earning more than they spend to keep the majority of their money in a checking account or a savings account for the long term? Why?

How does the interest rate compare between checking and savings accounts?

What is one fee with a savings account that you do NOT have with a checking account?

Up to what value does FDIC insurance cover your deposits?

Part I: Research Savings Accounts

Pick one of the three apps in the article and fill out the following table. Fill in the rest of the table and answer the questions as you share out with the class.

How could paying for an app like one of these possibly help you save money?

What are some alternative ideas you could use for free?

Which earns more after 5 years?

This type of account features a low to modest interest rate, requires that you not withdraw your funds for a set period of time, and can be set up at most major banks and credit unions.1 Checking Account2 Savings Account3 Certificate of Deposit4 Money Market Account

What are the three main categories where banks and credit unions differ?

Describe the differences in one of these categories.

Does a bank or a credit union fit better with your own personal ideas of what you’d like out of your banking institution? Why?

What is one way banks make money, according to the video?

Why can banks offer you interest on your savings account but not your checking account?

Would you expect someone earning more than they spend to keep the majority of their money in a checking account or a savings account for the long term? Why?

How does the interest rate compare between checking and savings accounts?

What is one fee with a savings account that you do NOT have with a checking account?

Up to what value does FDIC insurance cover your deposits?

Does FDIC insurance cover checking accounts, savings accounts, both, or neither?

Part I: Research Savings Accounts

Part II: Research A Bank or Credit Union

Part III: Apply Your Knowledge!

Robert wants to get serious about saving for a new car. Which account would you recommend? Why?

Robert wants to get serious about saving for a new car. Which account would you recommend? Why?

The video references a high yield account. What does "high yield" mean?Giving a low returnGiving a high returnFree to open with any deposit amountRequiring a high initial deposit amount

If inflation is at 2% and you are earning 1% return on your savings account, what is your "real return?"+3%-3%+1%-1%

Chris wants to put money aside so he can buy his mom a birthday present.Savings=TrueNot Savings=False

Sam wants to buy school supplies for a project she is working on.Savings=TrueNot Savings=False

Aisha wants to withdraw $20 from an ATM so she can buy a movie ticket and go watch the movie with her friends.Savings=TrueNot Savings=False

Neil rides his bike every day to school and back and is responsible for maintaining his bike. He wants to make sure he has money to fix or replace anything that might break in the future.Savings=TrueNot Savings=False

Rosa is going on a vacation with her parents in a few months and wants to put the money she just got from the holidays aside to buy souvenirs.Savings=TrueNot Savings=False

Jamil wants to take his birthday money and put it away where it can grow for 15 years and help with a down payment on a future house he wants.Savings=TrueNot Savings=False

Harry has an account at his bank. It has a linked debit card and no limits on monthly withdrawals. He earns no interest on this account.Savings=TrueNot Savings=False

What are some things the “Savings” scenarios have in common?

For each of the “NOT” scenarios, discuss with a partner what might be a good alternative to savings

Pick one of the three apps in the article and fill out the following table. Fill in the rest of the table and answer the questions as you share out with the class.

How could paying for an app like one of these possibly help you save money?

What are some alternative ideas you could use for free?

On a graph, how could you tell the point where the accounts have the same balance?

What seems to be more important in the long-term, starting balance or monthly savings rate?

Which earns more after 5 years?

Which earns more after 20 years?

Compound interest leads to an exponential growth equation while simple interest results in linear growth. If you go further out to 25 years or 50 years, what do you think will happen to the difference between the compounding function and the simple interest function?

This type of account features a low to modest interest rate, requires that you not withdraw your funds for a set period of time, and can be set up at most major banks and credit unions.1 Checking Account2 Savings Account3 Certificate of Deposit4 Money Market Account

Does FDIC insurance cover checking accounts, savings accounts, both, or neither?

Part II: Research A Bank or Credit Union

Part III: Apply Your Knowledge!

Robert wants to get serious about saving for a new car. Which account would you recommend? Why?

Robert wants to get serious about saving for a new car. Which account would you recommend? Why?

The video references a high yield account. What does "high yield" mean?Giving a low returnGiving a high returnFree to open with any deposit amountRequiring a high initial deposit amount

If inflation is at 2% and you are earning 1% return on your savings account, what is your "real return?"+3%-3%+1%-1%

Chris wants to put money aside so he can buy his mom a birthday present.Savings=TrueNot Savings=False

Sam wants to buy school supplies for a project she is working on.Savings=TrueNot Savings=False

Aisha wants to withdraw $20 from an ATM so she can buy a movie ticket and go watch the movie with her friends.Savings=TrueNot Savings=False

Neil rides his bike every day to school and back and is responsible for maintaining his bike. He wants to make sure he has money to fix or replace anything that might break in the future.Savings=TrueNot Savings=False

Rosa is going on a vacation with her parents in a few months and wants to put the money she just got from the holidays aside to buy souvenirs.Savings=TrueNot Savings=False

Jamil wants to take his birthday money and put it away where it can grow for 15 years and help with a down payment on a future house he wants.Savings=TrueNot Savings=False

Harry has an account at his bank. It has a linked debit card and no limits on monthly withdrawals. He earns no interest on this account.Savings=TrueNot Savings=False

What are some things the “Savings” scenarios have in common?

For each of the “NOT” scenarios, discuss with a partner what might be a good alternative to savings

On a graph, how could you tell the point where the accounts have the same balance?

What seems to be more important in the long-term, starting balance or monthly savings rate?

Which earns more after 20 years?

Compound interest leads to an exponential growth equation while simple interest results in linear growth. If you go further out to 25 years or 50 years, what do you think will happen to the difference between the compounding function and the simple interest function?

This type of account features a low to modest interest rate, requires that you not withdraw your funds for a set period of time, and can be set up at most major banks and credit unions.
1 Checking Account
2 Savings Account
3 Certificate of Deposit
4 Money Market Account

The video references a high yield account. What does "high yield" mean?
Giving a low return
Giving a high return
Free to open with any deposit amount
Requiring a high initial deposit amount

If inflation is at 2% and you are earning 1% return on your savings account, what is your "real return?"
+3%
-3%
+1%
-1%

Chris wants to put money aside so he can buy his mom a birthday present.
Savings=True
Not Savings=False

Sam wants to buy school supplies for a project she is working on.
Savings=True
Not Savings=False

Aisha wants to withdraw $20 from an ATM so she can buy a movie ticket and go watch the movie with her friends.
Savings=True
Not Savings=False

Neil rides his bike every day to school and back and is responsible for maintaining his bike. He wants to make sure he has money to fix or replace anything that might break in the future.
Savings=True
Not Savings=False

Rosa is going on a vacation with her parents in a few months and wants to put the money she just got from the holidays aside to buy souvenirs.
Savings=True
Not Savings=False

Jamil wants to take his birthday money and put it away where it can grow for 15 years and help with a down payment on a future house he wants.
Savings=True
Not Savings=False

Harry has an account at his bank. It has a linked debit card and no limits on monthly withdrawals. He earns no interest on this account.
Savings=True
Not Savings=False

This type of account features a low to modest interest rate, requires that you not withdraw your funds for a set period of time, and can be set up at most major banks and credit unions.
1 Checking Account
2 Savings Account
3 Certificate of Deposit
4 Money Market Account

The video references a high yield account. What does "high yield" mean?
Giving a low return
Giving a high return
Free to open with any deposit amount
Requiring a high initial deposit amount

If inflation is at 2% and you are earning 1% return on your savings account, what is your "real return?"
+3%
-3%
+1%
-1%

Chris wants to put money aside so he can buy his mom a birthday present.
Savings=True
Not Savings=False

Sam wants to buy school supplies for a project she is working on.
Savings=True
Not Savings=False

Aisha wants to withdraw $20 from an ATM so she can buy a movie ticket and go watch the movie with her friends.
Savings=True
Not Savings=False

Neil rides his bike every day to school and back and is responsible for maintaining his bike. He wants to make sure he has money to fix or replace anything that might break in the future.
Savings=True
Not Savings=False

Rosa is going on a vacation with her parents in a few months and wants to put the money she just got from the holidays aside to buy souvenirs.
Savings=True
Not Savings=False

Jamil wants to take his birthday money and put it away where it can grow for 15 years and help with a down payment on a future house he wants.
Savings=True
Not Savings=False

Harry has an account at his bank. It has a linked debit card and no limits on monthly withdrawals. He earns no interest on this account.
Savings=True
Not Savings=False