Personal Finance Chapter 10

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

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