1. The Secrets of Saving

2. Congratulations! You have two job offers! POD…which option would you choose? Option 1: For the first twenty days of work, you will be paid $200 a day Option 2: The pay will be 1 penny for the first day. Each day the pay will double. So, it will be 2 pennies the second day, 4 the third, and so on

3. Option 1 - $200 per day How much would you be paid if you chose option 1? 20 days $200$

4. Option 2 - A Penny Doubled Daily Day 1$ 0.01 Day 2$0.02 Day 3$0.04 Day 4$0.08 Day 5$0.16 Day 6$0.32 Day 7$0.64 Day 8$1.28 Day 9$2.56 Day 10$5.12 Day 11$10.24 Day 12$20.48 Day 13$40.96 Day 14$81.92 Day 15$163.84 Day 16$327.68 Day 17$655.36 Day 18$1310.72 Day 19$2621.44 Day 20$5242.88 How much would you be paid if you chose option 2?

5. Which would you prefer? Option 1: $4,000.00 Option 2: $5,242.88 OR Powerful Penny!

6. If you won the lottery… Which option would you choose? Option 1: $1,000,000 today Option 2: A penny doubled every day for thirty days

7. A Million or a Penny? Day 21$10,485.76Day 26$335,544.32 Day 22$20,971.52Day 27$671,088.64 Day 23$41,943.04Day 28$1,342,177.28 Day 24$83,886.08Day 29$2,684,354.56 Day 25$167,772.16Day 30$5,368,709.12 If you choose the penny, you would have earned $5,368,709.12!

8. © Take Charge Today – December 2010 – The Secrets of Saving – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.4.1.G1 What is Interest? Interest - ______ Depository institution accounts may earn money from interest Interest earned- Calculated as a percent of total amount of money in account This percent is the interest rate

9. © Take Charge Today – December 2010 – The Secrets of Saving – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.4.1.G1 What accounts at depository institutions earn interest? _____________ ____ ______________ _______ ______________________ ____________ Definition Characteristics Money deposited at a bank or credit union that earns interest. Pays a higher interest rate than a savings account. Pays interest on a lump sum of money. Money stored until needed Interest earning Minimum deposit often required Number of monthly withdrawals often limited Specific time requirements When time period is complete, money and interest earned can be withdrawn Higher interest rates for longer time periods

10. © Take Charge Today – December 2010 – The Secrets of Saving – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.4.1.G1 Time Value of Money Value of money saved in these accounts increases! Time value of money- money paid in future is not equal to money paid today

11. © Take Charge Today –August 2010 –Saving– Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Year 5 Interest Earned: $33.26 Amount Savings is Worth: $140.26 Year 10 Interest Earned: $56.46 Amount Savings is Worth: $196.72 Year 15 Interest Earned: $79.19 Amount Savings is Worth: $275.90 Year 20 Interest Earned: $111.07 Amount Savings is Worth: $386.97 Year 50 Interest Earned: $845.46 Amount Savings is Worth: $2945.70 Time Value of Money Magic! Initial Savings: $100.00 at 7% interest Year 1 Interest Earned: $7.00 Amount Savings is Worth: 107.00

12. © Take Charge Today – December 2010 – The Secrets of Saving – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.4.1.G1 Factors affecting the Time Value of Money Time Save for as long as possible! Amount of Money Save as much as possible, as often as possible! Interest Rate Save at the highest interest rate possible!

13. © Take Charge Today – December 2010 – The Secrets of Saving – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.4.1.G1 $500 saved at 3% interest Year Amount of money account is worth Initial amount saved$500.00 1$515.00 2$530.45 3$546.36 4$562.75 5$579.64 Use the time value of money to your advantage!

14. © Take Charge Today –August 2010 –Saving– Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Simple Interest Compound Interest Simple Interest vs. Compound Interest Interest earned on the principal investment Earning interest on interest and principal Principal is the original amount of money invested or saved

15. © Take Charge Today –August 2010 –Saving– Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1,000.075350.00 Simple Interest Equation: Step 1 P (Principal) r (Interest Rate) t (Time Period) I (Interest Earned) $1,000 invested at 7% interest rate for 5 years

16. © Take Charge Today –August 2010 –Saving– Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Simple Interest Equation: Step 2 P (Principal) I (Interest Earned) A (Amount Investment is Worth) $1,000 invested at 7% interest rate for 5 years 1,000350$_______

17. © Take Charge Today –August 2010 –Saving– Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Compound Interest for a Single Sum = $1,402.55 Compound Interest for a Single Sum = $1,402.55 Simple Interest = $1,350.00 Compound vs. Simple Interest Why? Year 1: 1,000x.07=70 and 1,000+70=1,070 Year 2: 1,070 x.07= 74.90 and 1,070+74.90=1,144.90 Year 3: 1,144.90x.07=80.14 and 1,144.90+80.14=1,225.04 Year 4: 1,225.04x.07=85.75 and 1,225.04+85.75=1,310.80 Year 5: 1,310.80*.07=91.76 and 1,310.80+91.76=1,402.55 By reinvesting the interest earned, the interest payment keeps growing as interest is compounded on interest $1,000 invested at 7% interest rate for 5 years

18. © Take Charge Today –August 2010 –Saving– Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Single Sum vs. Investments Over Time Compound Interest for Investments Over Time = $5,757.00 Compound Interest for Investments Over Time = $5,757.00 Compound Interest for a Single Sum = $1,402.5 Compound Interest for a Single Sum = $1,402.5 To make the most of your money, utilize compound interest and continue to invest!

19. © Take Charge Today –August 2010 –Saving– Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Compound Interest Number of times interest is compounded has effect on return Interest compounding frequently will yield higher returns $1,000 invested at 7% for 5 years Compounding MethodAmount Investment is Worth Daily$1,419.02 Monthly$1,417.63 Quartely$1,414.78 Semi-Annually$1,410.60 Annually$1,402.55

20. © Take Charge Today –August 2010 –Saving– Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Smart Investing Which would you choose? An investment earning compound interest An investment earning compound interest An investment earning simple interest OR Largest return

21. © Take Charge Today –August 2010 –Saving– Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Smart Investing An investment earning an interest rate of 2% An investment earning an interest rate of 2.1% OR Which would you choose? Largest return

22. © Take Charge Today –August 2010 –Saving– Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Smart Investing An investment with an interest rate compounded monthly An investment with an interest rate compounded yearly OR Which would you choose? Largest return

23. © Take Charge Today –August 2010 –Saving– Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Time Value of Money Math Practice #1 Sara deposited $600.00 into a savings account one year ago. She has been earning 1.2% in annual simple interest. Complete the following calculations to determine how much Sara’s money is now worth. Step One: Step Two: 600.00.0121 600.00 7.20

24. © Take Charge Today –August 2010 –Saving– Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Time Value of Money Math Practice #1 How much is Sara’s investment worth after one year? $607.20