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CHAPTER 12 SAVING AND BORROWING. A. WHY SAVE? 1. Save money for a big purchase 2. Save money for emergencies 3. Save money to give you security 4. Save.

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Presentation on theme: "CHAPTER 12 SAVING AND BORROWING. A. WHY SAVE? 1. Save money for a big purchase 2. Save money for emergencies 3. Save money to give you security 4. Save."— Presentation transcript:

1 CHAPTER 12 SAVING AND BORROWING

2 A. WHY SAVE? 1. Save money for a big purchase 2. Save money for emergencies 3. Save money to give you security 4. Save to meet your spending goals 5. When consumers save, it is money that businesses can borrow!

3 WHY SAVE??? BUY A HOUSE! BUY A CAR! BUY A GAME SYSTEM! JUST BECAUSE!

4 B. SAVINGS ACCOUNTS 1. What type of interest does the account pay? Is interest accrued annually? Is it compound interest? 2. Is there a minimum deposit? 3. Is it a time-deposit? (You must leave money in for a minimum time period) 4. Any related fees?

5 C. 3 TYPES OF SAVINGS 1. Regular savings account - offers lowest interest, but with no minimum balance 2. Money Market account - Requires a large minimum deposit 3. Certificate of deposit (CD) - a periodic savings account with penalties for early withdrawal

6 D. BORROW? 1. Need $$$$ for a large purchase - ie: home, car, appliances 2. Emergencies occur while people are short on cash 3. Need $$$ to buy new clothes, stereos, go out to restaurants, etc 4. Borrow: take a loan out or use credit cards

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8 E. CREDIT CARDS 1. Convenient and easy to use 2. Handy in case of emergencies 3. Can be dangerous if you don’t know how much you’ve spent 4. Can be dangerous if you can’t afford to pay the bill! 5. Annual Percentage Rate (APR) - how much of a % you will pay 6. Membership fees - some charge an annual fee 7. Service or Transaction fees - late payments, borrow cash fee, etc

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10 F. Bank Loans 1. Not easy to get; complicated! 2. Consumer must prove ability to pay back loan 3. Need for collateral (something used in exchange for cash if you can’t pay loan)

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12 G. Savings Bonds 1. Safe investments with a good interest rate 2. Have long maturity dates so people need to wait in order to cash them 3. Interest is not taxed until the bond is cashed!

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