| 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 |