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Budgeting and Saving

Budgeting and Saving. Simple interest is the money earned on the principal, or deposit The rental price of money Compound interest is computed on the sum of the original principal and accrued interest. Interest on your interest Use online calculators to estimate earnings.

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Budgeting and Saving

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  1. Budgetingand Saving

  2. Simple interest is the money earned on the principal, or deposit • The rental price of money • Compound interest is computed on the sum of the original principal and accrued interest. • Interest on your interest • Use online calculators to estimate earnings

  3. How Much Should I Save? • No easy answer but a rule of thumb is 50/30/30 • 50% of income to needs • 30% percent of income to wants • 20% of income to savings • The first goal for a young adult should be an emergency fund to cover 3-9 months of fixed expenses

  4. Where should I put the money I saved? • Under your mattress • Better yet convert it to gold and bury it in the desert. Be sure to make a treasure map

  5. Options for Saving • Consider 3 factors • Liquidity: The ability to convert an asset to cash quickly • Return- the income on an investment. It is usually quoted as a percentage • Risk- The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment • More return generally means more risk

  6. Low risk options for savings • Look for FDIC or NCUA insured • This means the Federal government guarantees your deposit for up to $250,000 dollars

  7. Saving • Savings accounts- deposit account held at a bank that provides principal security and a modest interest rate • Certificates of deposit - A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination

  8. Automatically save • Consider automatically transferring your money to a saving account • Hide your money from yourself! • People who split their direct deposit paychecks into different accounts put away up to $90 more a month than people who use other methods to save.

  9. Where do I find the best rates? • Do your research: Bankrate.com has a list • Forbes maintains a list • Watch out for fees!! You likely want a bank with 0 fees and no minimum requirement • Online banks typicly offer the highest rates (clos to 1% compared to 0.05%) • AZ Credit Union offers an account that returns 1%

  10. Worksheets • 1) https://www.practicalmoneyskills.com/foreducators/lesson_plans/lev9-12/SA_Lesson1.pdf • 2) https://www.practicalmoneyskills./foreducators/lesson_plans/lev9-12/SA_Lesson9.pdf • 3) https://www.practicalmoneyskills.com/foreducators/lesson_plans/lev9-12/SA_Lesson10.pdf

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