WHY WE SAVE
Why do people save money?
For big purchases, future goals, and emergencies
Living paycheck to paycheck makes saving money very _____.
Difficult
Saving money before spending it on anything else is called what?
Paying yourself first
Money added to your savings balance over time is called what?
Interest
Darwin wants a $900 laptop in 6 months. How much must he save per month?
Since Darwin needs $900 total and has 6 months, we divide the total cost by the number of months. $900 divided by 6 equals $150, so he needs to save $150 each month.”
$150
Saving for unexpected expenses like car repairs is called saving for what?
Emergencies
Name ONE reason people struggle with saving money.
Not earning enough money
Which saving strategy splits money into Needs, Wants, and Savings?
50/30/20 Rule
You _____ interest when you save money and _____ interest when you borrow money.
Earn and Pay
Darwin’s weekly savings goal is $37.50. True or False?
Darwin needs to save $150 each month. Since there are about 4 weeks in a month, we divide $150 by 4. That equals $37.50, so the statement is true.
True
True or False: Everyone’s saving plan looks the same.
False
Which is NOT a reason people struggle to save?
A) Not earning enough
B) High expenses
C) Believing saving isn’t important
D) Enjoying saving money
Enjoying saving money
Giving every dollar a job and ending the month with $0 is called what?
Zero-Based Budgeting
Interest calculated only on the original amount saved is called what?
Simple Interest
A savings account is a place to store money safely while earning what?
Interest
Someone who saves consistently is usually planning for what kind of needs?
Future needs
Borrowing money from lenders with high interest rates can make saving harder.
True
Using physical cash for different spending categories is called what?
Cash Envelope System
Interest calculated on the original amount PLUS previous interest is called what?
Compound Interest
Which account usually earns the highest interest if you don’t need the money for years?
Certificate of Deposit (CD)
A Certificate of Deposit earns the highest interest because the money stays in the account for a set amount of time. Since the money isn’t being used, the bank rewards the saver with a higher interest rate.
People save money to prepare for both planned and unplanned expenses.
True
Living beyond your needs often leads to what saving problem?
Not being able to maintain savings
Which saving strategy focuses on tracking every dollar earned and spent?
Zero-Based Budgeting
What formula is used to calculate interest earned?
Principal × Rate × Time
$100 in a savings account with 2% interest for one year will result in what?
A little more than $102.
With a 2% interest rate, $100 earns about $2 in one year. Because interest can compound, the total will be a little more than $102.
Interest Earned=Principal×Rate×Time
We use simple interest to estimate, but compounding explains why the balance is slightly higher.