MS. MAHPLANNING 10: FINANCES

Saving Your Money

By identifying your needs vs. wants you can potentially save your hard earned money by not spending it on unimportant items.

What would you do if you had to save $20.00 of your own money next month? How would you save this money? Save $20.00 a week $ ____ per month $ ___ per year $80 per month and $1,040 per year Save $20.00 per month $ ____ per year

What can you do with the money you have not spend?

Reasons to Save

To buy a big item or pay for a big bill that’s coming

To have emergency funds You loose your job You get hurt Unpredictable expenses

To build funds to investCan you think of any reasons?

How Can You Save?

Work more Increasing your income can provide you with more

money to save by helping to cover your expenses Ex: cut lawn, baby sit, return Arizona or Vitamin

Water bottles ;)Spend less

Reduce your spending on wants Pay yourself first

Set aside 10% of your earnings Plan for savings and include them in your budge!

Savings Vocabulary

Interest: money received over time for letting others borrow your money. Can also be price you pay over time for borrowing money.

Simple Interest: interest paid only on the initial deposit

Compound Interest: interest paid on the initial deposit and on any interest that has been earned

Simple Interest

Compound Interest

Rule of 72

An easy way to calculate approximately how long it will take for your savings to double at a compound interest rate.

Divide 72 by the interest rate to find out the number of years it will take to double the amount saved. 72/5% = 14.4 years to double

Divide 72 by the number of years of saving to find out the interest rate needed to double amount saved. 72/10 = 7.2% interest needed to double money in 10

years

Banking

What are Financial Institutions?

Banks, Credit Unions, Trust CompaniesRange of services and fees varyCompetitive: you can switch if unhappy Make money by taking deposits and lending or investing deposits

Pay interest to depositors for the right to hold and use their money

Types of Banking Services

Chequing or savings account Debit cardCredit cardTelephone and online banking Automated teller machines (ATMs)Automatic Deposits and payments Account transfers Line of credit Loans Other (Traveler’s cheques, US dollar accounts,

safety deposit boxes, etc.)

Comparing Types of Banks

Location, hours, number of offices, number of ATMs

Monthly-fees: cheques, ATM withdraws

Interest rate earned, minimum deposit to earn interest, compounding method, fees charged if below minimum

Special features: discounts

Types of Bank Accounts

Savings account: a deposit account where your money is secure but accessible and usually earns a very limited amout of interest Low risk, low interest rates

Types of Bank Accounts

Guaranteed Investment Certificate (GIC) & Term Deposits: a deposit where you agree to leave the money in the account for a fixed period of time (90 days- 5 years). Get interest at a higher rate than savings

account

Types of Bank Accounts

Canada Savings Bond (CSB): when you buy a CSB you are lending your money to the federal government. Government pays interest until you decide to cash in

(redeem) the bond. Can purchase from most financial institutions

Types of Bank Accounts

Tax-Free Savings Account: can contribute up to $5,500 annually and investment income earned is tax-free. Can invest in guaranteed investment certificates,

term deposits, etc.