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Notes- Saving and Interest rates

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This guide explores the fundamentals of saving money and interest rates, emphasizing the importance of saving for future needs such as big purchases, emergencies, and retirement. It differentiates between simple and compound interest rates, illustrating how interest is charged on loans and earned on savings accounts. Simple interest applies only to the principal amount, while compound interest includes both the principal and accrued interest, leading to more substantial growth over time. Understanding these concepts is crucial for making informed financial decisions.

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Notes- Saving and Interest rates

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  1. Notes- Saving and Interest rates Standard: SSEPF2d- Evaluate savings options SSEPF4d- Explain the difference between simple and compound interest rates.

  2. Saving • Savings in money set aside for the future. • Reasons to save: 1. big purchases 2. emergencies 3. retirement

  3. Interest Rates • When someone borrows money they are charged interest. • People who take out loans borrow money from savings accounts.

  4. Interest Rates • Interest Charged: interest the banks charges a person to borrow (loan/credit) • Interest Earned: Interest the bank pays for the use of your money (Saving Account) Interest charged is greater than Interest earned

  5. Interest Rates

  6. Types of Interest • Simple: Rate applied only to the value of the principal • Compound: Interest applied to both the principal and the accrued interest Principal= The original amount of money SAVED OR BORROWED

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