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Similaire à Chapter 06 (20)
Chapter 06
- 1. © 2010 South-Western, Cengage Learning
Chapter
© 2016 South-Western, Cengage Learning
6.1 Growing Money
6.2 Saving Options
Saving for the
Future
6
© 2016 South-Western, Cengage Learning
- 2. © 2010 South-Western, Cengage Learning SLIDE 2
Chapter 6
Lesson 6.1
Growing Money
Learning Objectives
LO 1-1 Describe why it is important to save
money for the future.
LO 1-2 Explain how money grows through
compounding.
LO 1-3 List the various places where you
can save.
© 2016 South-Western, Cengage Learning
- 3. © 2010 South-Western, Cengage Learning SLIDE 3
Chapter 6
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 short-
term and long-term needs.
© 2016 South-Western, Cengage Learning
- 4. © 2010 South-Western, Cengage Learning SLIDE 4
Chapter 6
Short-Term Needs
Short-term needs are expenses beyond
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
© 2016 South-Western, Cengage Learning
- 5. © 2010 South-Western, Cengage Learning SLIDE 5
Chapter 6
Long-Term Needs
Long-term needs are expenses that are
costly and require years of planning and
saving.
Examples:
Home ownership
Education
Retirement
Investing
© 2016 South-Western, Cengage Learning
- 6. © 2010 South-Western, Cengage Learning SLIDE 6
Chapter 6
Peace of Mind
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 to give up present spending to
provide for the future
© 2016 South-Western, Cengage Learning
- 7. © 2010 South-Western, Cengage Learning SLIDE 7
Chapter 6
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.
© 2016 South-Western, Cengage Learning
- 8. © 2010 South-Western, Cengage Learning SLIDE 8
Chapter 6
Annual Percentage Yield (APY)
Annual percentage yield (APY) is the
actual interest rate an account pays,
stated on a yearly basis with
compounding included.
Because all financial institutions must
calculate APY the same way, you can
use APY to easily compare the yields on
different accounts.
© 2016 South-Western, Cengage Learning
- 9. © 2010 South-Western, Cengage Learning SLIDE 9
Chapter 6
Year
Beginning
Balance
Interest
Earned (6%)
Ending
Balance
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.
© 2016 South-Western, Cengage Learning
- 10. © 2010 South-Western, Cengage Learning SLIDE 10
Chapter 6
Where to Save
Commercial banks
Savings banks
Savings and loan associations
Credit unions
Brokerage firms
Online accounts
© 2016 South-Western, Cengage Learning
- 11. © 2010 South-Western, Cengage Learning SLIDE 11
Chapter 6
Lesson 6.2
Savings Options
Learning Objectives
LO 2-1 List the features and explain the
purposes of different savings options.
LO 2-2 Discuss factors that influence
selection of a savings plan.
LO 2-3 Describe ways to save regularly.
© 2016 South-Western, Cengage Learning
- 12. © 2010 South-Western, Cengage Learning SLIDE 12
Chapter 6
Savings Account Choices
Learn about the different savings options
available to you.
Different types of accounts can
contribute to your overall plan in different
ways.
© 2016 South-Western, Cengage Learning
- 13. © 2010 South-Western, Cengage Learning SLIDE 13
Chapter 6
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.
© 2016 South-Western, Cengage Learning
- 14. © 2010 South-Western, Cengage Learning SLIDE 14
Chapter 6
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 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.
© 2016 South-Western, Cengage Learning
- 15. © 2010 South-Western, Cengage Learning SLIDE 15
Chapter 6
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.
© 2016 South-Western, Cengage Learning
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Chapter 6
Selecting a Savings Plan
Liquidity
Safety
Convenience
Interest-earning potential (yield)
Fees and restrictions
© 2016 South-Western, Cengage Learning
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Chapter 6
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.
© 2016 South-Western, Cengage Learning
- 18. © 2010 South-Western, Cengage Learning SLIDE 18
Chapter 6
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.
© 2016 South-Western, Cengage Learning
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Chapter 6
Convenience
Locations
Services offered
© 2016 South-Western, Cengage Learning
- 20. © 2010 South-Western, Cengage Learning SLIDE 20
Chapter 6
Interest-Earning Potential (Yield)
Your goal is to earn as much interest as
you can, while maintaining the liquidity,
safety, and convenience you want.
Usually, the more liquid your deposit, the
less interest it will earn.
Shop around for the best APY in your
area.
© 2016 South-Western, Cengage Learning
- 21. © 2010 South-Western, Cengage Learning SLIDE 21
Chapter 6
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 other requirements.
© 2016 South-Western, Cengage Learning
- 22. © 2010 South-Western, Cengage Learning SLIDE 22
Chapter 6
Saving Regularly
Saving regularly will help you meet your
financial goals.
Over time, and with compounding interest, your
savings can grow into a substantial sum.
Pay yourself first through direct deposits,
automatic deductions, and payroll savings
plans.
© 2016 South-Western, Cengage Learning
- 23. © 2010 South-Western, Cengage Learning SLIDE 23
Chapter 6
$205.00 + 10.25 = $215.25
$205.00 × 0.05 = $10.25
$105.00 + $100.00 = $205.00
Compounding with Additional
Deposits
Year
Beginning
Balance Deposit
Interest
Earned (5%)
Ending
Balance
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
© 2016 South-Western, Cengage Learning
- 24. © 2010 South-Western, Cengage Learning SLIDE 24
Chapter 6
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.
© 2016 South-Western, Cengage Learning
- 25. © 2010 South-Western, Cengage Learning SLIDE 25
Chapter 6
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.
© 2016 South-Western, Cengage Learning
- 26. © 2010 South-Western, Cengage Learning SLIDE 26
Chapter 6
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!
© 2016 South-Western, Cengage Learning