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© 2010 South-Western, Cengage Learning
Chapter
© 2016 South-Western, Cengage Learning
6.1 Growing Money
6.2 Saving Options
Saving for the
Future
6
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 2
Chapter 6
Lesson 6.1
Growing Money
Learning Objectives
LO 1-1 Describe why it is important to save
money for the future.
LO 1-2 Explain how money grows through
compounding.
LO 1-3 List the various places where you
can save.
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© 2010 South-Western, Cengage Learning SLIDE 3
Chapter 6
Why You Should Save
The best reason to save money is to
provide for future needs, both expected
and unexpected.
Saving regularly will help you meet short-
term and long-term needs.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 4
Chapter 6
Short-Term Needs
 Short-term needs are expenses beyond
regular monthly items.
 Usually you will have to pay for these things
out of savings.
 Examples of short-term needs include the
following:
 Emergencies
 Vacations
 Social events
 Repairs
 Major purchases
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© 2010 South-Western, Cengage Learning SLIDE 5
Chapter 6
Long-Term Needs
Long-term needs are expenses that are
costly and require years of planning and
saving.
Examples:
Home ownership
Education
Retirement
Investing
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 6
Chapter 6
Peace of Mind
 Peace of mind comes from knowing that when
needs arise, you will have adequate money to
pay for them.
 The amount of money you save depends on:
 The amount of your discretionary or disposable
income
 The importance you attach to savings
 Your anticipated needs and wants
 Your willpower to give up present spending to
provide for the future
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 7
Chapter 6
How Money Grows
 The amount of money you deposit into a
savings account is called the principal.
 For the use of your money, the financial
institution pays you money called interest.
 Interest represents earnings on principal.
 As principal and interest grow, more interest
accumulates.
 This is known as compound interest, or interest
paid on the original principal plus accumulated
interest.
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© 2010 South-Western, Cengage Learning SLIDE 8
Chapter 6
Annual Percentage Yield (APY)
Annual percentage yield (APY) is the
actual interest rate an account pays,
stated on a yearly basis with
compounding included.
Because all financial institutions must
calculate APY the same way, you can
use APY to easily compare the yields on
different accounts.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 9
Chapter 6
Year
Beginning
Balance
Interest
Earned (6%)
Ending
Balance
1 $100.00 $6.00 $106.00
2 $106.00 $6.36 $112.36
3 $112.36 $6.74 $119.10
Compounding Interest Annually
 The Year 1 ending balance is the Year 2 beginning
balance.
 The Year 2 ending balance is the Year 3 beginning
balance.
 The 6% interest rate stays the same, but the interest
earned increases each year.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 10
Chapter 6
Where to Save
Commercial banks
Savings banks
Savings and loan associations
Credit unions
Brokerage firms
Online accounts
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© 2010 South-Western, Cengage Learning SLIDE 11
Chapter 6
Lesson 6.2
Savings Options
Learning Objectives
LO 2-1 List the features and explain the
purposes of different savings options.
LO 2-2 Discuss factors that influence
selection of a savings plan.
LO 2-3 Describe ways to save regularly.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 12
Chapter 6
Savings Account Choices
Learn about the different savings options
available to you.
Different types of accounts can
contribute to your overall plan in different
ways.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 13
Chapter 6
Regular Savings Account
A regular savings account has a major
advantage—high liquidity.
Liquidity is a measure of how quickly you
can get your cash without loss of value.
A regular savings account is said to be very
liquid because you can withdraw your
money at any time without penalty.
The tradeoff for high liquidity, however, is
a lower interest rate.
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© 2010 South-Western, Cengage Learning SLIDE 14
Chapter 6
Certificate of Deposit
 A certificate of deposit (CD), or time deposit,
is a deposit that earns a fixed interest rate for a
specified length of time.
 A CD requires a minimum deposit.
 You must leave the money in the CD for the full
time period.
 If you take out any of your money early, you will pay
an early withdrawal penalty.
 A CD has a set maturity date, which is the date on
which an investment becomes due for payment.
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© 2010 South-Western, Cengage Learning SLIDE 15
Chapter 6
Money Market Account
 A money market account is a type of savings
account that offers a more competitive interest
rate than a regular savings account.
 There are two different kinds of money market
accounts:
 Money market deposit account
 Money market fund
 On average, money market funds will pay a
higher interest rate than money market deposit
accounts.
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© 2010 South-Western, Cengage Learning SLIDE 16
Chapter 6
Selecting a Savings Plan
Liquidity
Safety
Convenience
Interest-earning potential (yield)
Fees and restrictions
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© 2010 South-Western, Cengage Learning SLIDE 17
Chapter 6
Liquidity
Liquidity is how quickly you can turn
savings into cash when you want it.
The need for liquidity will vary, based on
your age, health, family situation, and
overall wealth.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 18
Chapter 6
Safety
 Safety of principal means that you are
guaranteed not to lose your savings deposit,
even if the bank or other financial institution
fails and goes out of business.
 Most financial institutions are insured by a
government agency, the Federal Deposit
Insurance Corporation (FDIC) or National
Credit Union Association (NCUA).
 Deposits in banks, no matter what type, are
almost always safer than investments in the
stock market.
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© 2010 South-Western, Cengage Learning SLIDE 19
Chapter 6
Convenience
Locations
Services offered
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© 2010 South-Western, Cengage Learning SLIDE 20
Chapter 6
Interest-Earning Potential (Yield)
Your goal is to earn as much interest as
you can, while maintaining the liquidity,
safety, and convenience you want.
Usually, the more liquid your deposit, the
less interest it will earn.
Shop around for the best APY in your
area.
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© 2010 South-Western, Cengage Learning SLIDE 21
Chapter 6
Fees and Restrictions
Different accounts and institutions have
different rules.
Before you open an account, be sure to
understand the withdrawal restrictions,
minimum balances, service charges,
fees, and other requirements.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 22
Chapter 6
Saving Regularly
 Saving regularly will help you meet your
financial goals.
 Over time, and with compounding interest, your
savings can grow into a substantial sum.
 Pay yourself first through direct deposits,
automatic deductions, and payroll savings
plans.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 23
Chapter 6
$205.00 + 10.25 = $215.25
$205.00 × 0.05 = $10.25
$105.00 + $100.00 = $205.00
Compounding with Additional
Deposits
Year
Beginning
Balance Deposit
Interest
Earned (5%)
Ending
Balance
1 $0.00 $100.00 $5.00 $105.00
2 $105.00 $100.00 $10.25 $215.25
3 $215.25 $100.00 $15.76 $331.01
4 $331.01 $100.00 $21.55 $452.56
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© 2010 South-Western, Cengage Learning SLIDE 24
Chapter 6
Direct Deposit
 With direct deposit, your net pay is deposited
electronically into your bank account.
 You receive a nonnegotiable copy of your
check and stub, notifying you of the amount
deposited directly into your account.
 You can have your automatic deposit split
between accounts, with some going into
savings and some going into checking to cover
your bills.
© 2016 South-Western, Cengage Learning

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© 2010 South-Western, Cengage Learning SLIDE 25
Chapter 6
Automatic Deductions
Automatic deductions represent money
you have authorized your bank or other
organization to move from one account
to another at regular intervals.
With a payroll savings plan, you
authorize your employer to make
automatic deductions from your
paycheck each pay period.
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© 2010 South-Western, Cengage Learning SLIDE 26
Chapter 6
Collecting Coins and Cash
Some people find it convenient to set
aside their spare change and money left
over each day or week.
Setting aside small amounts of change
each day will lead to large sums over
time.
It’s surprising how pennies can add up to
make dollars!
© 2016 South-Western, Cengage Learning