Saving

For which of the following should you save? (check all that applied)

• Emergency fund

• Purchases

• Wealth building

Calculate the compound interest for 500 at 18% interest for four years

Assume interest is compounded annually.

Compound Interest = P(1+r)^t

The saving habits of Ben and Arthur best illustrate which principle of saving?

• The length of time money is invested matters.

• The amount of the initial investment is the key.

• Rate of return matters.

The persistent rise in the cost of goods and services

• deflation

• inflation

Which of these is a characteristic of certificates of deposit (CDs)?

• They last for a set period of time.

• They can be opened with any amount of money.

• They allow access to the money at any time without penalty.

Sofia has saved $10,000. She wants to be sure that she is earning interest on her money and can add to her savings. She also wants to be able to access her money if the need should arise.

Which type of account is most suitable for Sofia’s needs?

• a money market account

• a certificate of deposit

• a savings bond

Define the term that money is set aside and left alone for a ʺrainy day".

• Emergency Fund

• Sinking Fund

• Money Market Fund

Why is compound interest more advantageous than simple interest?

• It's more difficult to calculate, so fewer people use compound interest, making more profits for those who do

• The benefit of compound interest is tremendous in the early years and decreases over the long-term

• With compound interest, you earn interest not only on the amount you have saved but also on the interest you've already earned

• Compound interest has fewer fees than simple interest

How can you use compound interest to your advantage when it comes to investing for your retirement?

• Invest for retirement starting when you are in your 50s so you can maximize the impact of compound interest

• Begin investing for retirement while you in your 20s since the impact of compound interest grows over the long-term

• Invest for retirement starting when you are in your 30s since you will have more money to invest then

• Wait until you have $5,000 saved and invest in a lump sum since that is the minimum amount for most investment accounts