Why should you save?

|Short Term |Long Term |
|Definition: Expenses beyond your regular monthly items |Definition: Expenses that are costly and require years of planning and|
| |saving |
|Examples: Emergencies, Vacations, Social Events, Repairs, Major |Examples: Home Ownership, Education, Retirement, Investment |
|Purchases | |

How Money Grows:

The amount of money you deposit into a savings account is called the principal.

Interest represents earnings on principal.

As principal and interest grow, more interest accumulates.

This is known as compound interest, or interest paid on the original principal plus accumulated interest.

Annual percentage yield (APY) is the actual interest rate an account pays, stated on a yearly basis with the compounding included. (this is referring to the interest rate paid when using compound interest)

Where to Save: □ Commercial banks- full service bank □ Savings banks- along w/ Commercial banks □ Savings and loan associations- S&L’s (usually used to loan out money for a home mortgage) □ Credit unions- Have to meet qualifications to become member □ Brokerage firms- (Ex. Scottrade, Ameritrade) Sells stocks and bonds □ Online accounts- (Ex. Wells Fargo, American Express, Chase)

Savings Options at Financial Institutions

As we talk about the types of savings options, please fill in the appropriate blanks with information.

|Strategy / |What is it? |What’s the risk? |What are the pros? |What are the cons? |
|Account Type | | | | |
|Savings Account |A deposit account that earns |Low Risk with a savings account |High Liquidity |Lower Interest Rates |
| |interest and is issued by a bank |because insured by FDIC or NCUA | |Some charges service fees when you |
| |or credit union | | |make more than the max. withdrawal |
| | | | |in a period of time |
|Certificate of Deposit |Deposit that earns a fixed |Minimal risk because it is insured by|Requires Minimum Deposit |Must leave CD for full time period |
|(CD) |interest rate for a specified |the FDIC/NCUA |Higher Interest rates than |If you take out any part of money |
| |length of time |