Savings Accounts. Now that you are comfortable using a bank, you will probably want to open a savings account.

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Presentation transcript:

Savings Accounts

Now that you are comfortable using a bank, you will probably want to open a savings account.

Why save money?  To have in case of emergencies  To build up a large sum of money to make special purchases (like cars, houses, etc.)  To “pay yourself”  To earn more money by making interest

How does a savings account work?  You may add money to your account (make deposits)  You make take money from your account (make withdrawals)  The bank pays you for keeping your money there (earning interest)

The Passbook When a savings account is opened, the bank gives its owner a passbook. This passbook is a place to keep a record of all savings transactions.

Look at the passbook and answer these questions. 1.What was the balance after the 2 nd deposit? 2.What was the balance on Dec. 21? 3.How much was withdrawn altogether? 4.How much was deposited altogether? 5.How much interest was earned?

Here are the entries for one account. Write each entry in the correct column and figure the balance after each.

Earning Interest One of the best features of a savings account is that the bank pays you for saving your money by giving you interest on the money you save. To calculate the amount of interest that is earned some banks use the simple interest formula.

The Simple Interest Formula I=PRT I—Interest (money earned) P—Principal (money saved) R—Rate (percent paid by bank) T—Time (in years)

Example Let’s say you have $ in your savings account and the bank pays you 5% interest in a year. How much interest will you earn? Use the formula I = PRT (Be sure to change the percent to a decimal!) I = PRT (Be sure to change the percent to a decimal!) I = 100(.05)(1) I = 5 You will earn $5.00!

Try one Figure the interest earned by $425 at 7.5% interest for 5 years.

Another one $35,000 at 4.25% for 10 years

Figure the interest on each amount here. 1.$250 at 5%, 2 years 2.$350 at 7%, 3 years 3.$4000 at 3.5%, 5 years 4.$5000 at 12%, 10 years

End Day 4 Assignment: Savings Account Worksheet

End Day 4