Let your money, make you money!! If it was guaranteed that if you invested $100 every month for 40 years (for a total investment of $48,000) that the money would increase to $200,000 would you start investing today?
You deposit money into banks, who then loan out your money to others Interest Rate: annual amount (%) either saved or paid out Banks charge you interest rates on loans –Cars: 8% / Houses 5-6% –Credit cards: 15-20% or more Banks pay you interest rates on savings accounts
Compound Interest: $100 each month for…. Inter est Rate 5 Yrs $ , %$6,31513,294 21, , , , ,85673, %$6,65214,774 24, , , , , , %$7,01216,470 29, , , , , ,14 5 Interest paid on original deposit + any interest earned in earlier years
So, where should you put your money?
Savings Accounts Deposit money into banks –FDIC insured Deposits up to $250,000 are backed (insured) by the federal gov Can’t lose $ You can withdraw / deposit at any time –May have a minimum deposit of $25 –May charge a monthly fee! Low interest rates –0.05% per year
.8% Discover savings
Money Market FDIC insured Higher minimum balance usually May limit # of withdrawals per year Slightly higher interest rate –0.25 – 0.55%
CDs: Certificates of Deposit FDIC insured Minimum deposits Must keep in CD for a set amount of time (cannot withdraw!) Slightly higher interest rates –9 month CD: 0.35% –12 month CD: 0.60% (Wells Fargo)
1.24% for a 12 month CD No minimum deposit
Rule of 72 To estimate how long it takes to double your money, take 72 and divide by your interest If your interest rate is 8% 72 / 8 = 9 years to double your original investment 72.html
Fun w/Math! A is the amount accumulated P is principal (original investment) r is the annual interest rate n is the number of years A =P(1+ rn) If you invested $5,000 for 5 years w/interest of 3% what is the amount you will have at the end of 5 years?