The best reason to save money is |
to provide for future needs, bot expected and unexpected. |
Short-term needs |
expenses beyond your regular monthly items. Usually, you will have to pay for these things out of savings |
examples of short-term needs |
○ Car ○ College ○ Gas money ○ Apartment/house ○ Travel /vacations ○ Life insurance ○ College debt ○ Repairs ○ Emergencies ○ Social events |
long term needs |
expenses that are costly and require years of planning and saving |
examples or long term needs |
○ House and/or “permanent living situation”/house ownership ○ Retirementt* ○ Pregnancy ○ Children ○ Life insurance ○ Debt ○ Emergencies ○ Kids college /education loans ○ Any social event that you will be somewhat apart of (weddings) |
what things can be considered both short term and long term needs? |
house, life insurance, debt, college, social events |
average retirement age |
80 |
average life expectancy age |
78 |
Majority of Americans will _____ until they _____ |
work ; die |
who can determine when you retire? |
You and only you |
where does your peace od mind come from? |
knowing that when needs arise, you will have adequate money to pay for them |
the amount of money you save depends on |
– The amount of your discretionary or disposable income – The importance you attach to savings -You anticipated needs and wants -Your willpower |
what is the difference between disposable and discretionary income |
disposable- after taxes discretionary- after taxes and after every day living expenses |
the amount of money you deposit into a savings account is called the |
principal |
____ represents earnings on principal |
interest |
as principal and interest grow, |
more interest accumulates |
compound interest |
interest paid on the original principal plus accumulated interest |
Annual percentage yield (APY) |
the actual interest rate an account pays, stated on a yearly basis with the compounding included |
because all financial institutions must calculate APY the same way, you can use APY to |
easily compare the yields on different accounts |
commercial banks |
usually offer the lowest of the lowest interest rate |
savings banks |
less known, but tend to offer more interest than commercial banks |
brokerage firms |
investment companies that also offer you savings options- higher than commercial |
online accounts |
online banks…. higher than commercial banks (meaning only slightly higher) |
a regular saving account has |
major advantage |
T or F- a regular savings account has high liquidity |
true |
T or F- brokerage firms offer the lowest of the lowest interest rates |
FALSE- commercial banks |
liquidity |
a measure of how quickly you can get your cash without loss of value – how quickly you can get your cash |
A regular savings account is said to be very ____ because you can withdraw your money at any time without penalty |
liquid |
higher the liquidity … |
lower the interest |
savings interest |
0.06% |
CD interest |
0.08% |
T or F- savings interest has a higher interest rate than CD? |
FALSE |
CD is also known as |
a time deposit |
deposit that earns a fixed interest rate for a specified length of time |
Certificate of Deposit (CD) |
T or F- you have to leave your money in a CD for the full time period |
TRUE |
T or F- if you take out your money early from a CD, nothing will happen |
FALSE- If you take out any part of your money early, you will pay an early withdrawal penalty |
A CD has a set_____, which is the date on which an investment becomes due for payment |
maturity date |
what are the 2 options you have when your CD reaches its maturity date? |
Opt. 1: roll it into a new CD, start the process againOpt. 2: take the money out |
a type of savings account that offers a more competitive interest rate than a regular savings account |
money market account |
T or F- a money market account offers more savings that a saving account |
TRUE |
On average, money market funds will pay ______ ________ ____than money market deposit account |
higher interest rate |
T or F – APY and interest rates are 2 totally different things |
FALSE – they are the same |
your net pay is deposited electronically into your bank account |
direct deposit |
T or F- almost everyone does a direct deposit |
true |
You receive a nonnegotiable copy of your _____ ___ ____, notifying you of the amount deposited directly into your account |
check and stub |
T or F- you can only have your automatic deposit in one account |
FALSE- – You can have your automatic deposit split between accounts, with some going into savings and some going into checking to cover your bills |
Automatic deductions |
represent money you have authorized your bank or other organization to move from one account to another at regular intervals |
payroll savings plan |
you authorize your employer to make automatic deductions from your paycheck each pay period |