3.10 Specialized Savings Accounts

GRAPH: Average College Tuition & Costs 2020-2021

What happens when we want to save for something in the distant future like buying our first home or paying for college? Study the chart of annual college costs to answer the questions below.

VIDEO: What's the Difference Between Saving & Investing?

Have you ever heard someone say, “Back in my day, a gallon of milk only cost $1.25!” The fact that goods become more expensive over time has to do with inflation. Watch this video to learn more about how investing can help you “beat” inflation.

VIDEO: Investing Basics: The Power of Compounding Interest

In the last resource, you learned the difference between saving and investing, including how investing can help you outpace inflation. For long-term goals, investing is the key to growing your money through compounding returns. Watch this video to explore how compounding works and answer the questions.

INFOGRAPHIC & GRAPH: 529 Plans

In the previous lesson, you learned about types of savings accounts and how to open one with a bank or credit union. But, with their super low interest rates, a savings account won’t keep pace with inflation. To invest for college many years in the future, you can use a special account called a 529. Use the infographic, the written info, and the graph to answer the questions that follow.

VIDEO: Benefits of a Health Savings Account?

If you think college can be expensive, just wait until you become responsible for paying your own health expenses, especially as you age and may require even more expensive healthcare. A specialized health savings account (HSA) option exists, and it shares quite a few characteristics with 529 plans. As you watch, take note of the benefits of saving or investing into an HSA.

ARTICLE: IRA: What It Is, How It Works, and How to Get Started

Once you start working, you’ll want to start saving or better yet INVESTING for retirement. Depending on your employer, you might have a pension or 401(k). But, almost anyone who works to earn income can open a retirement fund called an IRA. There are even Roth IRAs specifically for kids and teens! Read to learn more.

TEACHER TIP: This full article is a bit lengthy. Recommended sections are What is an IRA, Understanding IRAs, Roth IRA, and What is the benefit of an IRA.

MATH CONNECTION - Analyzing Visual Data

Investing for your long-term goals is smart because you’ll have many years during which your returns can compound. So, rather than earning tiny amounts of interest like a savings account, you can make big gains if the market goes up and if your returns have time to compound over years or decades. This graph shows some possible scenarios.

Part I: Infographic

To answer these questions, analyze the infographic and the fine print written in the grey box at the bottom.

Part II: Graph

The graph below illustrates the growth of retirement investments for the investor who starts at 15 years old. The purple line represents the total contributions made over time. The orange line represents the total value of those investments.

Part III: Percent Change

You can determine how much an investment account (or really anything) has grown by using the formula for percent change.