Chapter 10: Saving for the Future

1. Chapter 10:Saving for the Future Part 1 Presentation by Scott Feil 12/13/2005

2. Overview • Reasons to Save • Interest • Ways to Save • Savings Options • Savings Plans • Regularity

3. Reasons to Save • Short Term Needs • Emergencies, Vacations, Social Events, Major Purchases • Long Term Needs • Home ownership, Education, Retirement, Investing • Financial Security • Discretionary Income • What you have left after you’ve paid your bills

4. Interest • Principal • The amount of money you deposited • Interest • The money you are paid by a bank or other financial institution for the use of your money • Compound Interest • Interest is paid on the principal and on interest already earned • APY • Annual Percentage Yield - the actual interest rate paid per year

5. Ways to Save • Commercial Banks • Provide a variety of services • Bank cards, ATMs, overdraft protection, different types of loans • Insured by the FDIC • Savings Banks • Specialize in savings accounts and real-estate loans • Insured by FDIC • Savings and Loan Associations • S&Ls failed in the 1980s, most merged with other banks • Now are all insured by FDIC

6. Ways to Save, cont. • Credit Unions • Non-profit (“not-for-profit”) organizations • Members work in same/similar occupations • Members pool their money • Offer higher savings interest and lower loan rates • Insured by NCUA (Nat. Credit Union Admin.) • Savings accounts called “share accounts” • Savings take the form of “shares” of the credit union • Also: IRAs, checking, loans, CDs, etc

7. Ways to Save, cont. • Brokerage Firms • Buy and sell different types of securities • Securities • Stocks, bonds • Represent equity or ownership • Loan of money to a company or the government • Stockbroker • Person who buys/sells securities for clients