FINANCIAL LITERACY LEARNING CENTER

IMPORTANCE OF SAVING

ALWAYS PAY YOURSELF FIRST

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BENEFITS OF SAVINGS

The main reason it’s important to save your money is so you can reach your goals, such as buying a house or a new car. Aside from that, having money set aside is important in case of emergencies. You can minimize financial risks (like getting into credit card debt) by ensuring that you have money when unexpected expenses arise. Another benefit to saving money (in a bank) is the interest that you earn or the money the bank pays you for keeping your money with them. Interest is calculated based on time and the amount of money in your account. The earlier you start saving, the more money you will make off interest because of compounding, or earning money on previously paid interest in your account. The Annual Percentage Yield (APY) reflects the interest you earn on a yearly basis.

THE POWER OF 72

This is a formula that helps you calculate how long it will take for your savings to double in value. Simply divide the interest rate by 72 to determine the number of years it will take: 72 divided by the interest rate equals the number of years

SAVING OPTIONS

There are several options for saving your money, including under a mattress. However, you won’t earn any interest that way, and you’ve now seen how that interest can add up. One way to save is with a Certificate of Deposit, or CD. These typically offer a higher rate of interest than regular savings accounts in exchange for your keeping the money on deposit for a set term. You can also choose to save in a Money Market Account, which offers a higher rate of interest and usually requires a higher minimum balance. You can make deposits and withdrawals with these. Another option would be a Statement Savings Account, which typically allows unlimited deposits, but limits the number of fee-free withdrawals you can make during a month. You typically earn interest on the money you have on deposit and will receive a statement at least quarterly listing all transactions in the account. Not only do you earn interest when keeping your money in a bank, but you can also have peace of mind knowing that it’s safe because member financial institutions (most of them) are protected by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA).