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Saving for the Future. Chapter 10. Growing $$$$. Short-term Needs Expenses beyond your regular monthly items. Examples Emergencies: unemployment, sickness, accident. Vacations: short weekend trips Social Events: weddings, special occasions… Repairs: cars, appliances, plumbing,

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growing
Growing $$$$
  • Short-term Needs
    • Expenses beyond your regular monthly items.
  • Examples
    • Emergencies: unemployment, sickness, accident.
    • Vacations: short weekend trips
    • Social Events: weddings, special occasions…
    • Repairs: cars, appliances, plumbing,
    • Major Purchases: car, major appliances, furniture, etc.
growing why where how
Growing $$: Why? Where? How?
  • Long-term Needs
    • Expenses that require years of planning and saving.
  • Examples
    • Home ownership
    • Education
      • Work, scholarships, student loans, grants
    • Retirement
    • Investing
financial security
Financial Security
  • The amount of money you save will vary according to several factors such as…
    • Amount of your discretionary/disposable income
    • The importance you attach to savings
    • Your anticipated needs and wants
    • Your willpower, or ability to give up present spending in order to provide for your future
how money grows
How Money Grows
  • Principal
    • The amount of money you deposit into a savings account.
  • Interest
    • Represents earnings on principal.
    • Financial institution pays you money for use of your money.
    • As principal & interest grows, more interests accumulates.
      • Compound Interest: interest paid on the original principal plus accumulated interest.
where to save
Where to Save?
  • Commercial Banks
    • Full-service
    • Provide widest variety of banking services
    • Most people keep checking & savings at same bank
  • Savings Banks
    • Mutual savings bank
    • 2 Primary Services:
      • Savings account
      • Loans and real property
where to save1
Where to Save
  • Savings and Loan Associations
    • Primarily lends money for home mortgages.
  • Credit Unions
    • Not-for-profits established by groups of people such as employees in similar occupations who pool their money
    • You must be member.
where to save2
Where to Save?
  • Brokerage Firms
    • Buy and sell different types of securities.
  • Online Accounts
    • Online savings accounts that often work in tandem with your credit card.
savings options
Savings Options
  • Regular Savings Account
    • High liquidity
    • What is liquid?
    • Once account is open, free to make withdrawals and deposits.
  • Certificate of Deposit (CD)
    • A deposit that earns a fixed interest rate for a specified length of time
    • You must leave money in the CD for full time period
    • Have maturity date: an investment becomes due for payment
savings options1
Savings Options
  • Money Market Account
    • Offers more competitive interest rates than regular savings account.
    • 2 kinds
      • Money market deposit accounts
      • Money market funds
which is best for you
Which is best for you?
  • Look at 5 things:
    • Liquidity
      • How quickly you can turn savings into cash when you want it.
    • Safety
      • You want your money to be safe from loss.
      • Most financial institutions are insured by a government agency (FDIC)
which is best for you1
Which is best for you?

3. Convenience

  • Location and services offered.

4. Interest-Earning Potential

  • You want to earn as much interest as you can.
  • Shop around for the rates.
  • Savings account usually have low rates.

5. Fees and Restrictions

  • Accounts and institutions have different rules.
  • Check out and understand: withdrawal restrictions, minimum balances, service charges, other requirements
save regularly
SAVE REGULARLY
  • Direct Deposit
    • Net pay deposited electronically into your bank account.
    • Money available in account faster.
    • Can have some going into savings and checking
  • Automatic Deductions
    • Money you have authorized your bank or other organization to move from one account to another.
  • Collecting Coins and Cash
    • Set aside spare change, and add to piggy bank.