Savings Ms. Perez
Bell ringer What is one item that you have saved to purchase? What is one thing that you want to purchase in the future that you will need to save for?
Reasons for saving Emergencies Expensive purchases Recurring expenses Retirement Special goals
Long term and short term goals • Short term • Less then one year • Long term • Over one year
Write down one long term and one short term savings goal Keep this piece of paper, you will answer more questions today
Where to save? Banks Credit unions MAKE SURE THE $ is insured by Federal Deposit Insurance Corporation(FDIC)
Annual percentage Yield(APY) How much interest the bank will pay you on your $$ The higher the APY the more $ you make Example if your APY is 4% and you invested 100 dollars the bank will give you $4 of interest
Annual Percentage Rate APR Annual cost of borrowing $ Usually associated with loans, morgages, etc.
APR DOES NOT EQUAL APY Generally APR listed is lower then AYP APY uses compounding interest
Investments When savings are used to earn income
compound interest vs. simple interest • Compound interest • Paying interest on your savings plan PLUS the accumulated interest • Interest on interest
Simple interest Interest that is paid ONLY on the original amount deposited, not on past interest paid.
Two ways to think • Save now, have money for the future? • Spend now, I might not be here later? • What will saving my money result in? • How does age effect savings?
Methods for saving money Payroll deductions Money market accounts CD’s
Pay roll deduction • $ taken out of pay check • Monthly usually • Can be multiple • For retirement • For savings
Money market account (MMA) Savings account Less flexibility then a traditional checking/savings account Only allow certain # of withdraws allowed a month Usually require a balance in excess of $1000 Average yield 3%, usually Higher interest, minimum amount of $ in account, limited # of with drawls
Certificates of Deposits (CD’s) Time Deposit Banks pay a fixed amount of interest for a fixed amount of time of a fixed amount of money Require a minimum deposit Can’t take $ out without penalty fee
Write this down on the same sheet of paper Which type of savings account would work best in your life right now? Why
Think back to your bell ringer-write this down on the same piece of paper What is the approximate cost of this item? How much could you save a month to put towards this item? How many months would it take you to save for this item?