How we Save

What does it mean to "pay yourself first"? a. Deposit money into your savings account before spending on anything else. b. Purchase an item you want before something you need. c. Pay all of your mandatory expenses before paying for optional expenses. d. Obtain an additional job to supplement your income.

Deposit money into your savings account before spending on anything else.

What causes inflation to occur in the first place?

● Demand-Pull Inflation: Demand for products increase, but supply is the same ● Cost-Pull Inflation: Production costs increase, but demand is the same ● Monetary Inflation: Economy is booming, so people have more money to spend on products

Not in Edpuzzle) Why might some people still prefer manually saving their money (e.g. manually transfer or deposit money into their savings account)?

Manually saving might be a good option for people who like more control and like to know where their money is going each month. Keep in mind that if you decide to manually save, you'll need to be responsible and diligent to make sure you're putting that money away each pay period!

You are trying to pick an account to put your money in. Why is the Rule of 72 useful during this process?

The Rule of 72 is useful, because I can use it to determine which account will double my money in the shortest amount of time.

Elizabeth is investing her money into an account that gives her an interest rate of 4%. How many years will it take her money to double? a. 10 years b. 12 years c. 15 years d. 18 years

18 years

How to save money every day

Check unit price Be selective when you are offered discounts (like coupons) Spend less on things that are not important for you Make a shopping list Plan your meals ahead of time Use electricity on off-peak hours Use technology to find cheap gas prices Opt for public transportation

How does the age a person starts saving at impact the amount they can earn in compound interest?

Compound interest is interest made from interest. Therefore, the earlier you start saving, the more you earn in compound interest.

Why would your savings account "lose value" if the rate of return you receive is lower than the rate of inflation?

If the rate of return, or interest, you receive from your savings account is lower than the rate of inflation, then your money does not grow as quickly as the rate of inflation. As a result, the purchasing power of your money in the future is lower than it is today.

Why is the 50-20-30 rule easy for people to follow, especially those who are new to budgeting and saving?

It is a straightforward way to save. The 50 and 30 allows you to spend on essentials and items of your choice and the 20 allows you to save and pay off debts.

"Shannon certainly knows what her dollar amounts are, but she's mostly unclear as to the timeframe." Why is it important to know the timeframe when working towards your savings goals?

Knowing the timeframe of your goals is important, because you need to know how fast you need to save the money. You can budget your savings amount accordingly.

What are some things your family does on a regular basis to save money? How often does your family do these things?

Shop online when it's cheaper (Always) Cut cable contract and watch tv shows online (Always) Pack lunch instead of buying lunch (Sometimes)

Which practices have you found to be the most effective in saving money? Why do you think they are effective?

Shopping online is effective. The seller doesn't have to pay for retail space so prices stay lower for consumers. It is also nice that the items you want come straight to your door, not having to use transportation to go to the store, which saves gas and in turn, money.

This article recommends that 20% of your income is meant for your savings, investments, and payments to reduce debt. What are the potential risks of having all three of these buckets belong in the same category?

You might invest all 20% and save none. Alternatively, you may need more than 20% to reduce debt, leaving you no money to save or to invest.

What is the benefit of automating your savings account contributions? a. You can change the amount you deposit each month. b. The fees are relatively small to enroll in this service. c. Your money will be transferred automatically and guarantees you will be contributing to your savings. d. Your employer will contribute additional money to your savings account if you enroll in this service.

Your money will be transferred automatically and guarantees you will be contributing to your savings.

Today's savings accounts do not offer interest rates much higher than 1%. How does this impact the power of compounding?

Your savings compound at a rate that is slower than the rate of inflation, so your money ends up losing value over time. In other words, your money will buy less in the future than it can today.

What is the 50-20-30 savings rule of thumb? a. 50% of your income should go towards flexible spending; 20% should go towards paying off debt, savings, and investments; 30% should go towards living essentials b.50% of your income should go towards living essentials; 20% should go towards paying off debt, savings, and investments; 30% should go towards flexible spending c. 50% of your income should go towards paying off debt, savings, and investments; 20% should go towards flexible spending; 30% should go towards living essentials d. 50% of your income should go towards living essentials; 20% should go towards flexible spending; 30% should go towards paying off debt, savings, and investments

50% of your income should go towards living essentials; 20% should go towards paying off debt, savings, and investments; 30% should go towards flexible spending

It took Samantha 6 years to double the money in her account. What interest rate was Samantha receiving on her account?

72/r = 6 r = 12 Samantha was receiving an interest rate of 12%.

Which strategy will help you save the most money? a. Wait until the end of the month and any money that you have not spent, add it to your savings account. b. On the last day of each month, deposit a fixed $10 to your savings account. c. As soon as you receive your paycheck, put a fixed amount or percentage of your money directly into your savings. d. Only deposit into your savings account when you have a large lump sum of money.

As soon as you receive your paycheck, put a fixed amount or percentage of your money directly into your savings.

An alternative to saving would be investing your money for a higher rate of return. How would this work to reduce the impact of inflation on your savings?

Having a higher rate of return on your investments means your money will grow at a rate that is faster than the rate of inflation. So, even if inflation is working to decrease the value of your investments, the rate of return you are receiving counteracts the impact, and actually continues to increase the worth of your savings over time.

Your friend, Alicia, is a graduating senior about to head to college in the fall. Alicia has a single checking account and is eager to open a savings account. After reading this article, she is inspired to open up multiple savings accounts to work towards her goals. Do you think it's a good idea for Alicia to do so? Why or why not?

I think Alicia should focus on one savings account at a time. Because she is just starting out, she may not be able to avoid fees that many savings accounts charge when you don't meet a minimum balance.

Choose the option that best completes this sentence: Compound interest is interest earned on ... a. the salary you receive b. the rate of inflation c. the tax return you receive d.the interest you receive

the interest you receive

Finish this sentence: The Rule of 72 tells me...

The number of years required to double my money at a given annual rate of return.