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Chapter 10 powerpoint (PowerPoint)


									         Chapter 10

Saving for the Future
   Goals for Chapter 10.1
Savings Goals and Institutions
 Describe different purposes of saving.
 Explain how money grows through
  compounding interest.
 List and describe the financial institutions
  where you save.
       Why You Should Save
   Short-Term Needs
    – Emergencies: unemployment, sickness,
      accident, death in family
    – Vacations
    – Social Events: weddings
    – Major Purchases: car, appliances, remodeling
       Why You Should Save
   Long-Term Needs
    – Home ownership (down payment)
    – Education
    – Retirement
    – Investing
   Financial Security
    – Peace of mind
      How Your Money Grows
 The amount of money deposited by a saver is
  called the principal.
 For use of the saver’s money, the financial
  institution pays the saver money called interest.
 Compound interest is interest computed on the
  original principal plus accumulated interest.
  (Figure 10-1 Pg. 239)
    – The more often interest is compounded, the greater
      your earnings.
      How Your Money Grows
   Earning on savings can be measured by the rate of
    return or yield.
    – Yield is the percentage of increase in the value of your
      savings due to earned interest.
 Because financial institutions compound interest
  in many ways, comparing yields can be difficult.
 The law requires all financial institutions to
  publish the annual percentage yield (APR),
  which is the actual rate you earn including
     Where Can You Save?
 Commercial Banks
 Savings Banks
 Savings and Loan Associations
 Credit Unions
 Brokerage Firms
      Goals for Chapter 10.2
    Savings Options, Features,
            and Plans
 Explain the features and purposes of savings
  accounts, certificates of deposit, and money
  market accounts.
 Discuss some of the factors that influence the
  selection of a savings plan.
 Explain at least two ways to save regularly.
             Savings Options
   Regular Savings Account
    – The major advantage of a regular savings
      account is liquidity. Liquidity is the ability of
      an asset to be converted into cash quickly
      without loss of value.
    – The tradeoff for liquidity is lower return.
             Savings Options
   Certificate of Deposit
    – A certificate of deposit (CD) is a deposit that
      earns a fixed interest rate for a specified length
      of time.
    – A CD has a set maturity date, which is the
      date on which an investment becomes due for
            Savings Options
   Money Market
    – A money market is a combination savings-
     investment plan in which money deposited is
     used to purchase safe, liquid securities.
    Selecting a Savings Plan
 Liquidity
 Safety
 Convenience
 Yield
 Fees and Restrictions

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