Saving for the Future. Personal Finance Chapter 10. Saving for the Future Lesson 10.1 P. 243 #1. Why do you need to start saving now to cover long-term needs? Long-term needs require a lot of money Homeownership – thousands of dollars for a down payment
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Why do you need to start saving now to cover long-term needs?
Explain how compounding interest makes your savings grow.
How can you compare interest rates on accounts that compound differently?
Explain how a savings account is more liquid that a certificate of deposit.
To earn a higher interest rate, what tradeoff will you likely have to make?
In what way is the interest paid on a money market account different from interest paid on a regular savings account?
Emergencies, vacations, social events, major purchases
Home ownership, education, retirement, investing
2. List several short-term needs that you expect to have in the next few months or years.
Answer will vary based on individual lives
I am currently planning a sweet sixteen party for my daughter
3. List your long-term plans that will require money in the next five years or more.
Answers will vary.
Education for my daughter
Retirement for myself and husband
4. What are some personal factors that help determine the amount of money you will save?
5. Why might people choose to save their money in a commercial bank when another type of financial institution offers a higher interest rate?
Commercial banks provide the widest variety of banking services, convenience
6. How is a credit union different from a savings and loan association?
Owned by members
Offer Individual Retirement Accounts (IRAs)
Higher interest earned, lower interest paid
Savings and Loan Association
Primarily to lend money for home mortgages
Many commercial bank services
Slightly higher interest
7. How much is an account insured by the FDIC?
The book says $100,000 but the amount was changed after the last financial market crash
$250,000 per bank, per account
This means never have more than $250,000 in any account
NCUA – provides insurance for credit unions
8. Why does a regular savings account pay less interest than a certificate of deposit?
A savings account is more liquid, less interest earned
CDs is less liquid, more interest earned
The longer banks can use your money, the more interest banks are willing to pay
9. What types of penalties might you face for early withdrawal of all or part of your savings from
10. What things should you consider when choosing a financial institution for your savings?
11. Describe ways you can force yourself to save.