![Page 1: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/1.jpg)
Chapter
© 2010 South-Western, Cengage Learning
Saving for the Future
10.110.1 Growing Money: Why, Where,and How
10.210.2 Savings Options, Features,and Plans
10
![Page 2: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/2.jpg)
SLIDE 2
Chapter 10
© 2010 South-Western, Cengage Learning
Lesson 10.1
Growing Money:Why, Where, and How
GOALSDescribe different purposes of saving.Explain how money grows through
compounding.List and describe the financial institutions
where you can save.
![Page 3: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/3.jpg)
SLIDE 3
Chapter 10
© 2010 South-Western, Cengage Learning
Why You Should Save
The best reason to save money is to provide for future needs, both expected and unexpected.
Saving regularly will help you meet your short-term and long-term needs.
![Page 4: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/4.jpg)
SLIDE 4
Chapter 10
© 2010 South-Western, Cengage Learning
Short-term Needs
Short-term needs are expenses beyond your regular monthly items.
Usually you will have to pay for these things out of savings.
Examples of short-term needs include the following: Emergencies Vacations Social events Repairs Major purchases
![Page 5: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/5.jpg)
SLIDE 5
Chapter 10
© 2010 South-Western, Cengage Learning
Long-term Needs
Long-term needs are expenses that are costly and require years of planning and saving.
Examples:Home ownershipEducationRetirementInvesting
![Page 6: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/6.jpg)
SLIDE 6
Chapter 10
© 2010 South-Western, Cengage Learning
Financial Security
Peace of mind comes 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 Your anticipated needs and wants Your willpower
![Page 7: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/7.jpg)
SLIDE 7
Chapter 10
© 2010 South-Western, Cengage Learning
How Money Grows
The amount of money you deposit into a savings account is called the principal.
For the use of your money, the financial institution pays you money called interest.
Interest represents earnings on principal. As principal and interest grow, more interest
accumulates. This is known as compound interest, or interest paid
on the original principal plus accumulated interest.
![Page 8: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/8.jpg)
SLIDE 8
Chapter 10
© 2010 South-Western, Cengage Learning
Annual Percentage Yield (APY)
Annual percentage yield (APY) is 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.
![Page 9: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/9.jpg)
SLIDE 9
Chapter 10
© 2010 South-Western, Cengage Learning
YearBeginning Balance
InterestEarned (6%)
EndingBalance
1 $100.00 $6.00 $106.00
2 $106.00 $6.36 $112.36
3 $112.36 $6.74 $119.10
Compounding Interest Annually
The Year 1 ending balance is the Year 2 beginning balance.
The Year 2 ending balance is the Year 3 beginning balance.
The 6% interest rate stays the same, but the interest earned increases each year.
![Page 10: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/10.jpg)
SLIDE 10
Chapter 10
© 2010 South-Western, Cengage Learning
Where to Save
Commercial banksSavings banksSavings and loan associationsCredit unionsBrokerage firmsOnline accounts
![Page 11: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/11.jpg)
SLIDE 11
Chapter 10
© 2010 South-Western, Cengage Learning
Lesson 10.2
Savings Options, Features,and Plans
GOALSExplain the features and purposes of
different savings options.Discuss factors that influence selection of
a savings plan.Describe ways to save regularly.
![Page 12: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/12.jpg)
SLIDE 12
Chapter 10
© 2010 South-Western, Cengage Learning
Savings Options
Once you have decided to establish a savings program, you need to know about the different savings options available to you.
You may want to deposit money in several types of accounts, because each can contribute to your overall plan in different ways.
![Page 13: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/13.jpg)
SLIDE 13
Chapter 10
© 2010 South-Western, Cengage Learning
Regular Savings Account
A regular savings account has a major advantage—high liquidity. Liquidity is a measure of how quickly you
can get your cash without loss of value.A regular savings account is said to be very
liquid because you can withdraw your money at any time without penalty.
The tradeoff for high liquidity, however, is a lower interest rate.
![Page 14: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/14.jpg)
SLIDE 14
Chapter 10
© 2010 South-Western, Cengage Learning
Certificate of Deposit
A certificate of deposit (CD), or time deposit, is a deposit that earns a fixed interest rate for a specified length of time.
A CD requires a minimum deposit. You must leave the money in the CD for the full
time period. If you take out any part of your money early, you will
pay an early withdrawal penalty. A CD has a set maturity date, which is the date on
which an investment becomes due for payment.
![Page 15: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/15.jpg)
SLIDE 15
Chapter 10
© 2010 South-Western, Cengage Learning
Money Market Account
A money market account is a type of savings account that offers a more competitive interest rate than a regular savings account.
There are two different kinds of money market accounts: Money market deposit account Money market fund
On average, money market funds will pay a higher interest rate than money market deposit accounts.
![Page 16: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/16.jpg)
SLIDE 16
Chapter 10
© 2010 South-Western, Cengage Learning
Selecting a Savings Plan
LiquiditySafetyConvenienceInterest-earning potential (yield)Fees and restrictions
![Page 17: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/17.jpg)
SLIDE 17
Chapter 10
© 2010 South-Western, Cengage Learning
Liquidity
Liquidity is how quickly you can turn savings into cash when you want it.
The need for liquidity will vary, based on your age, health, family situation, and overall wealth.
![Page 18: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/18.jpg)
SLIDE 18
Chapter 10
© 2010 South-Western, Cengage Learning
Safety
Safety of principal means that you are guaranteed not to lose your savings deposit, even if the bank or other financial institution fails and goes out of business.
Most financial institutions are insured by a government agency, the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA).
Deposits in banks, no matter what type, are almost always safer than investments in the stock market.
![Page 19: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/19.jpg)
SLIDE 19
Chapter 10
© 2010 South-Western, Cengage Learning
Convenience
LocationsServices offered
![Page 20: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/20.jpg)
SLIDE 20
Chapter 10
© 2010 South-Western, Cengage Learning
Interest-Earning Potential (Yield)
You want to earn as much interest as you can on your deposit, while maintaining the degree of liquidity, safety, and convenience you want.
Shop around for the best APY in your area for the type of account you want.
![Page 21: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/21.jpg)
SLIDE 21
Chapter 10
© 2010 South-Western, Cengage Learning
Fees and Restrictions
Different accounts and institutions have different rules.
Before you open an account, be sure to understand the withdrawal restrictions, minimum balances, service charges, fees, and any other requirements.
![Page 22: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/22.jpg)
SLIDE 22
Chapter 10
© 2010 South-Western, Cengage Learning
Saving Regularly
Saving regularly will help you meet all of your financial goals.
It is important not just to save but to save regularly.
Over time, and with compounding interest, your savings can grow into a substantial sum.
There are ways to make regular saving easier, including direct deposits and payroll deductions.
![Page 23: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/23.jpg)
SLIDE 23
Chapter 10
© 2010 South-Western, Cengage Learning
Direct Deposit
With direct deposit, your net pay is deposited electronically into your bank account.
You receive a nonnegotiable copy of your check and stub, notifying you of the amount deposited directly into your account
You can have your automatic deposit split between accounts, with some going into savings and some going into checking to cover your bills.
![Page 24: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/24.jpg)
SLIDE 24
Chapter 10
© 2010 South-Western, Cengage Learning
Automatic Deductions
Automatic deductions represent money you have authorized your bank or other organization to move from one account to another at regular intervals.
With a payroll savings plan, you authorize your employer to make automatic deductions from your paycheck each pay period.
![Page 25: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/25.jpg)
SLIDE 25
Chapter 10
© 2010 South-Western, Cengage Learning
Collecting Coins and Cash
Some people find it convenient to set aside their spare change and money left over each day or week.
Setting aside small amounts of change each day will lead to large sums over time.
It’s surprising how pennies can add up to make dollars!
![Page 26: Chapter © 2010 South-Western, Cengage Learning Saving for the Future 10.1 10.1Growing Money: Why, Where, and How 10.2 10.2Savings Options, Features, and](https://reader035.vdocument.in/reader035/viewer/2022081518/551c036e550346a84f8b4d42/html5/thumbnails/26.jpg)
SLIDE 26
Chapter 10
© 2010 South-Western, Cengage Learning
$205.00 + 10.25 = $215.25
$205.00 × 0.05 = $10.25
$105.00 + $100.00 = $205.00
Compounding with Additional Deposits
YearBeginning Balance Deposit
InterestEarned (5%)
EndingBalance
1 $0.00 $100.00 $5.00 $105.00
2 $105.00 $100.00 $10.25 $215.25
3 $215.25 $100.00 $15.76 $331.01
4 $331.01 $100.00 $21.55 $452.56