Banking &Financial Services A Viking Independent Bank Mrs. Sorrell Saving money Banking &Financial Services A Viking Independent Bank Mrs. Sorrell

U.S. Bureau of Labor Statistics reports that we spend (consume), on average 97 percent of our disposable income (after tax) 63% of Americans do not have enough money to cover a $500 emergency Avoid savings accounts at bricks and mortar banks, unless you get excited by a 0.01% return Savings facts

Disposable income (income after taxes) minus consumption spending Allowance, gifts, payment for odd jobs Employed students=net income after taxes “Pay Yourself First” Saving before spending on consumer goods Saving = Disposable income (income after taxes) -- consumption spending Saving defined

Incentives to saving Matching promise by an adult Satisfaction of buying a special gift in the future Banks pay you to use your money=earned interest Simple interest on savings is annual interest paid on the initial amount saved (principal) Compound interest is interest paid on both the principal and the added interest Incentives to saving

Saving Terminology Disposable income = consumption + saving Saving = disposable income – consumption Interest = Principal * interest rate * time (expressed in years) Saving Terminology

72 divided by the Rate (of interest being paid on savings) = the number of years it will take for savings to double when interest compounds Illustrates how compound interest doubles savings more quickly then simples interest Example: Compound Interest at 8% for 9 years 72 divided by 8% = 9 years At the end of 9 years, initial savings of $100 will have increased to $200—double the amount of initial savings The rule of 72