PF- 4 It Pays to Save, Savings Account, & Special Savings Accounts- 10/24/17(Tue.)- 10/30/17(Mon.)- Q: 1- Saving

Q 1, 12: How much would Keith have in his account after three years if he started with $200 and earns 2 percent interest, compounding annually?

- $12.24 - $200 - $400 - $212.24 answer: - $12.24

Q 1, 9: Why does the money in a savings account grow?

- It earns interest, plus it earns interest on the interest. - A bank manager invests the money in the stock market. - The federal government matches your deposit. - You don't pay taxes on it. answer: - A bank manager invests the money in the stock market. (guess)

Q 1, 1: A formula that helps you calculate how long it will take for your savings to double is the Rule of 72.

- True - False answer: - True

PF 4- Sec. 2: Before you select a savings account, you want to think about how long you'll keep your money in the account.

- True - False answer: - True Before you select an account, think about: - how long you'll be keeping your money in the account; - how often you'll want to withdraw money; - how much money you'll keep in the account.

Q 1, 2: Annual compounding pays more money than daily compounding.

- True - False answer: - True (guess)

Q 1, 3: The original amount of money you deposit in a savings account is the _____.

- annual percentage yield - interest threshold - principal - return answer: - principal

Treasury Inflation-Protected Securities

TIPS; a savings product that pays interest twice per year and provides protection against inflation

annual percentage yield

(APY); the amount of interest you will earn in one year from a savings account

Q 1, 11: Manny has his money in a savings account earning 3% interest. How long will it take his money to double?

- twelve years - two years - twenty-four years - eighteen years answer: - twenty-four years

club account

an account used to save money for a special reason, such as a holiday, a vacation, or college

variable interest rates

different interest rates paid for different size balances, with higher balances earning higher rates

compound interest

interest the bank gives on the interest that has been already earned

High-Yield Savings Accounts

High-yield savings accounts are like basic accounts, but they have more restrictions on how often withdrawals can be made and typically require a minimum balance. These accounts may offer 3 or 4 percent interest.

Info: Why save your money in a 529 plan?

There are several reasons. One obvious reason is to earn interest in order to pay for college tuition and other expenses. In addition, you do not need to pay taxes on the interest you earn from a 529 plan. Also, the amount you deposit is up to you. Everyone is eligible to start saving in a 529 plan.

Info: Remember, when faced with a tough financial decision, it's a good idea to use the PACED decision-making model. Remember, the steps to this process are:

1. Define the Problem. 2. List the Alternatives. 3. Select the Criteria. 4. Evaluate the alternatives 5. Make a Decision.

interest thresholds

the minimum balances before the bank begins paying interest

principal

the original amount of money invested or deposited into a savings account

return

the profit or gain from saving or investing money

Q 1, 4: The amount of interest you'll earn in one year from a savings account is the _____.

- APY - return - IDA - CD answer: - APY

PF 4- Sec. 1: Compound interest is the interest that is divided into different accounts.

- True - False answer: - False

Credit Union Savings Account

As you learned earlier, credit unions are like banks, but they are created by a large company or organization. They tend to offer higher interest on savings accounts.

Money Market Accounts

Money market accounts are like high-yield accounts. They offer a higher rate of interest, but you must start with a large deposit and there are restrictions on how often you can withdraw money.

U.S. Department of Treasury

an executive department of the United States government whose purpose is to manage the government's money

IDA

an individual development account or a matched savings accounts into which an organization, such as a foundation, corporation, or government, agrees to add money which matches the money you deposit

CD

certificate of deposit; an account where you leave your money for a set period of time and are unable to make deposits or withdrawals during this time unless you pay penalties

Info: Three other treasury securities include:

treasury bills, treasury notes, and treasury inflation-protected securities.

There are many savings options, and they all fall into five main categories:

- basic savings accounts - high-yield savings accounts - money market accounts - online savings accounts - credit union savings accounts

PF 4- Sec. 2: An online savings account _____.

- offers lower interest rates because it costs more money to maintain the online site - offers higher interest rates because they don't have the overhead that standard banks have - works nothing like a basic bank savings account - has more restrictions on how often withdrawals can be made and typically requires a minimum balance answer: - offers higher interest rates because they don't have the overhead that standard banks have

Info: CDs

If you don't mind leaving your money alone for several months to several years, consider taking out a certificate of deposit, or CD. This type of savings account usually offers the highest interest of any savings option at a bank. And generally, the longer you promise to keep your money in the account, the higher the interest rate. However, if you deposit your money in a CD, you cannot make deposits or withdrawals during the term. A term is a set period of time determined by the bank. CDs are a safe place to keep your money because the account is federally insured and there are generally no fees. However, you will need to pay a fee if you withdraw your money before the term has ended.

Info: You may also withdraw or take out money from your savings account. You can complete a withdrawal slip by entering the date, your name, the account number, and the amount you would like to withdraw.

Info: When you give the teller your withdrawal slip and bankbook, you will also need to provide identification, such as a passport or driver's license. Again, when the teller returns the bankbook, the amount you withdrew and your new balance will be printed in it.

Info: Treasury Securities

The U.S. Treasury is an executive department of the government. Its purpose is to manage the government's money. The department sells treasury securities. The savings bond already discussed is one type of treasury security. Buying savings bonds and other treasury securities is a safe investment because your money is insured by the U.S. government.

Info: 'Let's Review!'

There are many different options for saving money, some of which include: savings bonds, club accounts, IDAs, money market accounts, CDs, 529 plans, and treasury securities. Each type of savings account or product has features that make it the right choice for certain purposes. If you are faced with making a tough financial decision about where you should save your money, you should utilize the PACED decision making model.

PF 4- Sec. 3: What is an incentive for a person to contribute to an IDA?

- It earns the highest interest rates available at a bank. - It is good for the government. - An organization matches the amount deposited. - The interest on the account is not taxed. answer: - An organization matches the amount deposited.

Q 1, 10: It's early in the year, and Keesha would like to start saving money for next year's holiday presents. What type of account should Keesha open?

- CD - club account - 529 plan - money market account answer: - club account

PF 4- Sec. 2: There are several steps to opening a savings account. Select all of these steps.

- Collect all the required information. - Order checks. - Go to the bank and sign the necessary bank forms. - Choose a director for the account. - Complete a W-2 form. - Fill out a deposit slip and deposit at least the minimum amount of money. answer: - Collect all the required information. - Choose a director for the account. - Go to the bank and sign the necessary bank forms. - Fill out a deposit slip and deposit at least the minimum amount of money.

PF 4- Sec. 3: When you receive a savings bond worth $100, you can cash it for $100 right away.

- True - False answer: - False

PF 4- Sec. 3: Choose all that apply. Select all of the reasons an individual would save his money in a CD.

- high interest rates - the amount deposited is matched - safe - no fees - it is good for the U.S. government answer: - high interest rates - safe - no fees

PF 4- Sec. 1: Use the Rule of 72 to solve. Manny has his money in a savings account earning 4.5% interest. How long it will take his money to double?

- sixteen years - twelve years - two years - eighteen years answer: 72 divide by 4.5= 16 - sixteen years

Info: 529 Plan

A 529 Plan, also called a 529 college savings plan, is a savings plan for your education. This type of savings account is operated by a state or educational institution. The purpose is to help set aside money to pay for future college expenses. When you are ready to attend college, you can use the full value of the account at an accredited college or university. There are many 529 plans to choose from, so comparing how plans have performed is a good idea. The best performing 529 plans would have earned the most interest over a certain number of years. It is also helpful to visit a financial adviser when selecting a plan.

Info: IDA

An IDA is an individual development account. These are savings accounts where the money you deposit is matched. This means an organization, such as a foundation, corporation, or government agency, makes a deposit that matches the amount you deposit. You deposit $50 and they deposit $50. Why would an organization match an individual's deposit? The organization wants to encourage low-income families to save money on a regular basis. The purpose of IDAs is to help people become financially independent. Organizations involved in IDA programs want to help low-income families achieve self-sufficiency. Not everybody is eligible for an IDA. IDAs have specific requirements for eligibility, and they are regulated. If you open an IDA, the money must be used for one of the following reasons: job training, college tuition, starting up a small business, or a down payment for a home.

Info: Savings Bonds

Savings bonds are issued by the U.S. government and look like a certificate. You can purchase a savings bond worth anywhere from $50 to $10,000.

'LET'S REVIEW!'

When setting up a savings account, it's important to think about how much money you'll need to reach your goals and the best way for you to make money grow. In this lesson, you looked at the factors you should consider when selecting the best account. These factors include penalties and fees, interest rates, minimum balance, annual percentage yield (APY), interest thresholds, and variable interest rates. There are also many types of savings accounts. The accounts fit into the categories of basic bank savings account, high-yield savings account, money market account, credit union savings account, and online savings account.

Q 1, 15: Jack wants to be better at saving his money. Name five or more tips you could suggest to help him save.

Writer: 1. Money in a savings account can grow by saving your money towards a goal 2. improving the way you live, having money for emergencies and learn to manage you 3. learn to manage your money better.

PF 4- Sec. 1: In one or two sentences, describe how money in a savings account can grow.

Writer: Money in a savings account can grow by saving your money towards a goal, improving the way you live, having money for emergencies and learn to manage your money better.

Info: Club Account

You can set up a club account at a bank to save money for a special reason, such as a holiday, family vacation, or college. Holiday club accounts are interest-bearing savings accounts designed to help you save for the holiday season. These accounts have higher interest rates than the basic savings account, but usually have restrictions for withdrawals and require you to make regular deposits. And usually club accounts are open for just one year. Some of these accounts have fees and minimum balances. Here's information from a credit union about its holiday and vacation club accounts.

money market account

a savings account that offers a higher rate of interest when you make large deposits

Q 1, 8: Choose all that apply. Select all the reasons its important to save. - to reach long- and short-term goals - to help manage your money - to be prepared in case of emergency - to be ready for an unforeseen expense - to be a better steward of God's resources

answer: - to reach long- and short-term goals - to help manage your money - to be prepared in case of emergency - to be ready for an unforeseen expense - to be a better steward of God's resources

'Tools and Services' Just like with checking accounts, there are tools and services available at financial institutions to help you with your savings account. Here are some of them:

- Online statements allow you to view your balance and transactions online. - ATMs allow you to withdraw money. - Online savings plans help you set goals and track your progress. - Transfers allow you to move money to other accounts. - Direct deposit makes it easier to add money to your account. - Automatic transfers allow you to regularly move a certain amount of money from your checking account to your savings account.

'Opening and Maintaining a Savings Account' Opening a savings account is similar to opening a checking account. After you've compared your options for a savings account and selected the best account for you, follow these steps:

1. Gather the required information: date of birth, Social Security number, home address, and telephone number. 2. Choose a director for the account. If you are under the age of 18, you'll need a director on the account, usually a parent. 3. Go to the bank to sign the necessary bank forms. The director of the account must sign the forms, as well. 4. Fill out a deposit slip and deposit at least the minimum amount of money.

Q 1, 6: Sandra has a young child and would like to set money aside for her college education. Which type of savings option should Sandra choose?

- money market account - treasury security - basic savings plan - 529 plan answer: - money market account

treasury notes

T-notes; a savings product that pays interest every six months and is issued in terms of two, three, five, and ten years

Info: 'Evaluating Savings Options' With all of these saving options, how do you decide where to save your money?

With all of these saving options, how do you decide where to save your money? Sometimes the decision is easy. Let's say that you'd like an account that doesn't need a large balance, and you want to deposit and withdraw money frequently. In this situation, you'd want to start a basic savings account. Or, if you wanted to start saving for college for your child, a 529 plan would be a good choice. However, sometimes it is a difficult task to decide how to save your money.

'Selecting the Right Savings Account' Before you select an account, think about:

- how long you'll be keeping your money in the account; - how often you'll want to withdraw money; - how much money you'll keep in the account.

Info: 'Special Savings Accounts' In addition to the basic savings accounts you looked at in the previous lesson, there are special savings accounts and savings products. These accounts and products have different purposes. Some accounts are used to save for thirty years. Other accounts are used to save for college, just a few years away. And some products not only help you save, but are a good way to help the U.S. government. Some of the special savings accounts and savings products include:

- savings bonds; - CDs; - money market accounts; - 529 plans; - IDA; - club accounts; - treasury securities.

Q 1, 7: What is this form used to do?

- to withdraw money from a savings account - to deposit money in a savings account - to order checks - to open a savings account answer: - to order checks

PF 4- Sec. 1: The formula for the Rule of 72 is _____.

- years to double multiplied by 72 equals the interest rate - years to double equals 72 divided by the interest rate - years to double equals 72 multiplied by the interest rate - months to double equals 72 divided by the interest rate answer: - years to double equals 72 divided by the interest rate

PF 4- Sec. 3: If you received a $100 savings bond yesterday, can you use the money from the savings bond to buy an item that costs $85 today?

- yes - no answer: - no

Info: Money Market

Money market accounts were included in the last lesson about savings accounts. But money markets are special. They offer a higher rate of interest compared to a basic savings account. To open a money market account, you must start with a large deposit, and there are restrictions on how often you can withdraw money.

savings bond

a savings product or certificate issued by the U.S. government with values ranging from $50 to $10,000

PF 4- Sec. 1: Choose all that apply. Identify tips that help you save. - If you receive cash as a gift, save at least part of it. - Pay your bills on time to avoid late fees and finance charges. - Use direct deposit or set up your account to automatically transfer money directly into savings. - Save any extra money you get as a raise or bonus from your employer. - When you get a tax refund, save it. - If your employer offers a retirement plan, join it. - Avoid debt.

answer: - If you receive cash as a gift, save at least part of it. - Pay your bills on time to avoid late fees and finance charges. - Use direct deposit or set up your account to automatically transfer money directly into savings. - Save any extra money you get as a raise or bonus from your employer. - When you get a tax refund, save it. - If your employer offers a retirement plan, join it. - Avoid debt.

Info: Three categories of bonds are available. They are:

- Series EE savings bonds-These are safe savings products that you can use toward your education or for gifts. EE Bonds are purchased at half their face value, so the $100 bond costs only $50. EE Bonds must be held for at least one year before they can be cashed. However, it takes between ten to thirty years for the bond to reach its full value. For example, you pay $50 for a $100 bond, but you may wait twenty years for it to be worth $100. - Series HH savings bonds-This is a U.S. Treasury savings product issued in multiples of $500 that pays interest every six months. So, to purchase an HH savings bond, you would need to pay at least $500. You can purchase HH bonds for $1,000, $1,500, $2,000, and so on. The security needs to be held for ten years to reach its full value. - Series I savings bonds-These bonds may be purchased at face value. In other words, a $50 bond will cost $50. These bonds earn two types of interest: normal interest, like interest you earn on a savings account, and interest based on inflation. The interest based on inflation accounts for the general increase in the prices people pay for goods and services. So, if the government calculates inflation to be 1 percent, then the Series I savings bond will also earn 1 percent. Series I bonds must be held for one year before they can be cashed.

PF 4- Sec. 2: The annual percentage yield (APY) is the _____.

- interest rate on a checking account - amount of interest you're charged on a loan - amount of interest you'll earn in one year from a savings account - a certain type of savings account that yields the most interest answer: - amount of interest you'll earn in one year from a savings account

Q 1, 13: Choose all that apply. Select all the reasons someone might have for purchasing a savings bond.

- no taxes - safe - easy to buy - matched deposits - great as gifts - good for the United States government answer: - no taxes - safe - easy to buy - matched deposits - great as gifts - good for the United States government

Q 1, 5: Madison has an account that pays different interest rates, depending on how much she has in her account. This type of interest rate is called a _____.

- nominal interest rate - variable interest rate - real interest rate - annual percentage yield answer: - variable interest rate

PF 4- Sec. 2: Choose all that apply. Select each of the tools and services available with a savings account.

- online statement - ATMs - check books - online savings plan - transfer money to other accounts - direct deposit - car loan - automatic transfer answer: - online statement - ATMs - online savings plan - transfer money to other accounts - direct deposit - automatic transfer

Info: Examples Carmen has saved up $1,000. She currently has this money in a basic savings account, but she's not sure if she should keep it in this account or move it to a different account. She can leave this money alone for two years, and then she'd like to use the money to buy a car.

1. 'Define the problem.' Which savings option should Carmen select? 2. 'List the alternatives.' Review the following list of choices and analyze which savings accounts and products would be appropriate. CD basic savings account savings bond treasury security 529 plan money market IDA club account Did you choose CD and money market account? Did you eliminate the other choices? The savings bond and treasury security would take too long to reach their full value. The 529 plan is used only for college. The club account is only available for one year, and Carmen may not be eligible to save in an IDA. So, Carmen's alternatives are: the basic savings account, CD, and money market. 3. 'Select the criteria.' The amount of interest earned, the ability to make a withdrawal in two years, amount needed to open account. 4. 'Evaluate the alternatives.' Criteria Money Earned Available in Two Yrs. 'Alternatives' Basic Savings Account - $10 - yes CD - $81.60 - yes Money Market - $20; need $25,000 to open - yes 5. 'Make a decision.' Carmen decides to save her money in a CD because she can earn the most money and the money will be available in two years.

Basic Savings Accounts

Basic savings accounts at banks offer the lowest interest rates, usually about 2 percent. They have few restrictions on access to your money, and usually they don't require minimum balances.

Online Savings Accounts

Online savings accounts are much like basic bank accounts, but they offer higher interest rates because they operate online and don't have the overhead that standard banks have.

Info: Why do people buy bonds?

People buy bonds because they allow money to grow over time and they are federally insured, meaning you can't lose the money. Bonds are also easy to buy. Most banks and credit unions sell them, or you can purchase a bond from www.treasurydirect.org. In addition, bonds make nice gifts for events like birthdays or graduation. Also, buying a bond is good for the government. The government uses the money from the purchase of a savings bond to pay its employees, including soldiers. The government also uses the money to pay for buildings, equipment, ships, and military bases. And the government uses the money to make payments to people who are retired and to others in need.

PF 4- Sec. 2: a. In the text box below, enter one of your purchase goals. b. How much does this cost? You'll need to do some research to answer this question. For example, if your goal is to pay for college, find out what the tuition is for one year. If your goal is to buy a car, look in newspapers and online for prices on the particular car you want. c. How much money do you currently have saved? d. How much more do you need to reach you goal? e. List some steps you can take this year to help you save toward this goal. f. List some steps you can take next year to save toward this goal. A. Enter one of your purchase goals. B. How much does this cost? C. How much money do you currently have saved? D. How much more do you need to reach you goal? E. List some steps you can take this year to help you save toward this goal. F. List some steps you can take next year to save toward this goal.

Rough A. Enter one of your purchase goals. Goal: I will buy a laptop after I graduate high school to start writing books. B. How much does this cost? Cost: $999.00 C. How much money do you currently have saved? Money currently saved: $270.00 D. How much more do you need to reach you goal? Money needed to reach goal: $730.00 E. List some steps you can take this year to help you save toward this goal. After I graduate from high school I would get a job to start saving money. F. List some steps you can take next year to save toward this goal. Next year I will deposit $50 per month into my savings account to reach my goal. Writer: Ben's Planning Worksheet Goal: I will buy a laptop after I graduate high school to start writing books. Cost: $999.00 Money currently saved: $270.00 Money needed to reach goal: $730.00 After I graduate from high school I would get a job to start saving money. Next year I will deposit $50 per month into my savings account to reach my goal.

treasury bills

T-bills; a savings product sold by the US Treasury department at a discount from their face value and range in terms from a few days to six months

PF 4- Sec. 3: Pretend you are a grandmother or grandfather and you give $100 to a grandchild. Write a letter to your grandchild persuading him or her to buy a savings bond. Be sure to let your grandchild know how the government is going to spend the borrowed money.

Writer: Dear Granddaughter, I want you to know that you are going to be an adult and I want you to buy a savings bonds. I'm not forcing you to buy it but it will do you good for the future. You can buy them online, banks, or credit unions. This bonds are good for the government because he/she use the money from the savings bonds to pay its employees and soldiers. The government also uses the money to pay for buildings, equipment, ships, and military bases. The government also uses the money to make payments to people who are retired and to others in need. Your loving Grandfather, Benedict Figgins

term

a set period of time

Info: It's fairly easy to maintain a savings account compared to a checking account. When you open a savings account, you receive a book called a passbook or bankbook.

Info: The bankbook tells you how much money is in your account. Once you open your savings account, you can add money to it whenever you want. And just like a checking account, you'll fill out a deposit slip and bring it to a teller, along with your bankbook. After you make the deposit, the teller hands you your bankbook with the amount you deposited printed and your current balance already calculated.

Q 1, 14: List at least three tools or services that are available when you open a savings account.

Writer: 1. Money in a savings account can grow by saving your money towards a goal 2. improving the way you live, having money for emergencies and learn to manage you 3. learn to manage your money better.

Rule of 72

a formula that helps you calculate how long it will take for your savings to double in value

529 plan

a saving plan for education designed to help set aside funds to pay for future college costs