1. Saving for the Future
Chapter 10

2. Growing $$$$ Short-term Needs
Expenses beyond your regular monthly items.
Examples
Emergencies: unemployment, sickness, accident.
Vacations: short weekend trips
Social Events: weddings, special occasions…
Repairs: cars, appliances, plumbing,
Major Purchases: car, major appliances, furniture, etc.

3. Growing $$: Why? Where? How?
Long-term Needs
Expenses that require years of planning and saving.
Examples
Home ownership
Education
Work, scholarships, student loans, grants
Retirement
Investing

4. Financial Security
The amount of money you save will vary according to several factors such as…
Amount of your discretionary/disposable income
The importance you attach to savings
Your anticipated needs and wants
Your willpower, or ability to give up present spending in order to provide for your future

5. How Money Grows Principal Interest Represents earnings on principal.
The amount of money you deposit into a savings account.
Interest
Represents earnings on principal.
Financial institution pays you money for use of your money.
As principal & interest grows, more interests accumulates.
Compound Interest: interest paid on the original principal plus accumulated interest.

6. Interest Compounded Annually
Year
Beginning Balance
Interest Earned 6%
Ending Balance 1
$100 $6
$106 2
$6.36
$112.36 3
$6.74
$119.10

7. Where to Save? Commercial Banks Savings Banks Mutual savings bank
Full-service
Provide widest variety of banking services
Most people keep checking & savings at same bank
Examples: US Bank, 5/3 Bank, Chase Bank
Savings Banks
Mutual savings bank
2 Primary Services:
Savings account
Loans and real property
Ex: Guardian Savings, Cheviot Savings

8. Interest Compounded Quarterly
Year
Beg. Bal.
Rate
Qtr.1
Qtr.2
Qtr.3
Qtr.4
Ending
Balance 1
$100
.015
$1.50
$1.52
$1.55
$1.57
$106.14 2
$1.59
$1.62
$1.64
$1.66
$112.65 3
$1.69
$1.72
$1.74
$1.77
$119.57

9. Where to Save Savings and Loan Associations Credit Unions
Primarily lends money for home mortgages.
Ex: Third Federal Savings & Loan, Cincinnati Federal
Credit Unions
Not-for-profits established by groups of people such as employees in similar occupations who pool their money
You must be member.
Examples: Kemba Credit Union, Cincinnati Federal Credit Union

10. Where to Save? Brokerage Firms Online Accounts
Buy and sell different types of securities.
Securities are stocks and bonds issued by corporations or governments.
Examples: Edward Jones, TD Ameritrade
Online Accounts
Online savings accounts that often work in tandem with your credit card.

11. Savings Options Regular Savings Account Certificate of Deposit (CD)
High liquidity
What is liquid?
Once account is open, free to make withdrawals and deposits.
Certificate of Deposit (CD)
A deposit that earns a fixed interest rate for a specified length of time
You must leave money in the CD for full time period
Have maturity date: an investment becomes due for payment

12. Savings Options Money Market Account
Offers more competitive interest rates than regular savings account.
2 kinds
Money market deposit accounts
Money market funds

13. Which is best for you? Look at 5 things: Liquidity Safety
How quickly you can turn savings into cash when you want it.
Safety
You want your money to be safe from loss.
Most financial institutions are insured by a government agency (FDIC)

14. Which is best for you? 3. Convenience 4. Interest-Earning Potential
Location and services offered.
4. Interest-Earning Potential
You want to earn as much interest as you can.
Shop around for the rates.
Savings account usually have low rates.
5. Fees and Restrictions
Accounts and institutions have different rules.
Check out and understand: withdrawal restrictions, minimum balances, service charges, other requirements

15. SAVE REGULARLY Direct Deposit Automatic Deductions
Net pay deposited electronically into your bank account.
Money available in account faster.
Can have some going into savings and checking
Automatic Deductions
Money you have authorized your bank or other organization to move from one account to another.
Collecting Coins and Cash
Set aside spare change, and add to piggy bank.