BLU Let your money make you money If
BLU # Let your money, make you money!! If it was guaranteed that if you invested $100 every month for 40 years (for a total investment of $48, 000) that the money would increase to $200, 000 would you start investing today?
• You deposit money into banks, who then loan out your money to others • Interest Rate: annual amount (%) either saved or paid out • Banks charge you interest rates on loans – Cars: 8% / Houses 5 -6% – Credit cards: 15 -20% or more • Banks pay you interest rates on savings accounts
Compound Interest: $100 each month for…. 5 Inter est Yrs Rate $6000 10 15 20 25 30 35 40 48, 000 2. 0% $6, 315 13, 294 21, 00 6 29, 52 9 38, 94 7 49, 35 60, 856 73, 566 5 4. 0% $6, 652 14, 774 24, 69 1 36, 80 0 51, 58 4 69, 63 118, 59 91, 678 6 0 6. 0% $7, 012 16, 470 29, 22 7 49, 43 5 69, 64 6 100, 9 143, 18 200, 14 54 3 5 Interest paid on original deposit + any interest earned in earlier years
So, where should you put your money?
Savings Accounts • Deposit money into banks – FDIC insured • Deposits up to $250, 000 are backed (insured) by the federal gov • Can’t lose $ • You can withdraw / deposit at any time – May have a minimum deposit of $25 – May charge a monthly fee! • Low interest rates – 0. 05% per year
1. 15% • Discover savings
Money Market • • FDIC insured Higher minimum balance usually May limit # of withdrawals per year Slightly higher interest rate – 0. 25 – 0. 55%
CDs: Certificates of Deposit • FDIC insured • Minimum deposits • Must keep in CD for a set amount of time (cannot withdraw!) • Slightly higher interest rates – 9 month CD: 0. 35% – 12 month CD: 0. 60% (Wells Fargo)
1. 24% for a 12 month CD • No minimum deposit
Rule of 72 • To estimate how long it takes to double your money, take 72 and divide by your interest • If your interest rate is 8% 72 / 8 = 9 years to double your original investment
Fun w/Math! • • A is the amount accumulated P is principal (original investment) r is the annual interest rate n is the number of years A =P(1+ r) n • If you invested $5, 000 for 5 years w/interest of 3% what is the amount you will have at the end of 5 years?
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