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Saving Live without DEBT!! Unit Objectives • Understand the importance of saving • Define cost-benefit-analysis, financial intermediary, disposable income, savings, nominal income, real income, interest rates, prime rates • Relate interest rates to the decision to save or spend Today’s Objectives • Understand the importance of saving • Define cost-benefit-analysis, financial intermediary, disposable income, savings, nominal income, real income, interest rates, prime rates Discuss- You don’t have to write this down… • What % income do you think people save? • Is this too much? Not enough? • Do you have savings? • Why is/isn’t it important to save? Vocabulary •Cost-benefit analysis- weighing the advantages and disadvantages to make a choice •Financial Intermediary- lenders •Disposable income- income available after taxes •Savings- disposable income not spent •Nominal income- income measured in $ •Real income- income measured by the quantity of goods and services you can buy •Interest rate- price paid to savers and charged to buyer for loans •Prime rates- interest rate charged to trustworthy consumers by the bank Activity • Divide exit ticket page in ½ and in ½ again (creating 4 boxes) • Choose 4 vocabulary words from today to define in the form of a picture –1 per box, be sure to title the boxes with the vocabulary word. Today’s Objective • Relate interest rates to the decision to save or spend •Saving is important to both businesses and individuals •People value spending today more than saving for the future •Interest is the cost we pay to get what we want NOW • If interest rates are high, people will save more • If interest rates are low, people will save less • Loan rates vary based on differences in risk, loan duration, etc… • Banks and financial institutions act as intermediaries • Individuals, firms, and governments all borrow • Consuming more now means consuming less later • Consuming less now means consuming more later –Retirement? How do you want to live now? What do you want for later? What affects the decision to save or spend? •Interest rates!! Why do interest rates change? •Supply and demand of money/loans –Who indirectly has control of this monetary policy? How do we spend our disposable income? •Bills/Needs •Impulse Buys •Savings Equilibrium • When supply and demand of loans are = • Changes based on changes in supply or changes in demand. • How much interest are you willing to pay?? Activity • Who benefits from rising interest rates? Why? • Who benefits from decreasing interest rates? Why? • Draw a cartoon representing equilibrium. Interpret Saving Packet: • Saving Options: Venn diagram two options, write 1 formal paragraph telling me which option would best serve your needs. • Investment Risk: In complete sentences, tell me why you think Government securities are low risk. • Tax-Deferred Saving: In complete sentences, tell me why tax-deferred savings will make you more $. • Time and $: In 1 formal paragraph, tell me how time affects $ based on the table. • Future Value: (In complete sentences) How does the information presented in this table affect your decision to save? Why?
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