Saving Money - Pillar 2

The great thing about saving money is that through the power of compounding interest you will make more money. In fact, if you save $2000.00 a year between the ages of 7 - 21 and leave the money in an account with 7.25% interest until you are 65 you will have a million dollars. In other words, an investment of 30,000$ over 15 years will provide you with $970,000 in profit. Now that's the power of compound interest. (Bateman, Katherine, The Young Investor, 2001)

source:http://www.shopsite.com/html/tinas-mgr-demo/media/piggy.bank.gif

Hey?! Why don't you ever get bored when you put money in the bank? -- Because it keeps giving you interest! But you didn't start saving at 7 and you still want to be a millionaire, what can you do to make a million now? The Millionaire calculator will let you play around with this idea by changing the amount saved and the number of deposits and interest rate. Check it out and see how easily you could become a millionaire.

Compounding is the way to make the most of your savings (besides a high interest rate). In fact, Einstein, himself no slouch in the invention arena, said that "Man's greatest invention is compound interest." (Berg, Adriane, The Totally Awesome Money Book for Kids, 2002, p. 48)

source: http://fourh.ucdavis.edu/4hresource/clipart/other/index.asp

   
 

The National Association of Securities Dealers (NASD) provides a detailed calculator for calculating savings rates and returns: NASD, tools you can use, savings calculator.

You must complete at least two different savings scenarios (i.e. an initial deposit of $200 and monthly deposits of $10 and then change the variables. Feel free to change the variables several times to see how your savings rate is affected.) Print out the pages when you have completed the two scenarios. Attached to these you should add a coverpage detailing the "free money" made: compare the actual amount of money deposited (i.e. number of deposits, times $ deposited plus the initial deposit) versus the final amount to illustrate how much money was "made" thanks to interest.

Use two different interest rates as well.

Where should you SAVE?
  Now that you have gained some understanding of interest and savings accounts. Dowload the following investing document to see how much you know about various options for saving your money. The main variables to consider are 1) how liquid do you need your money to be?; 2) how risky do you want your savings to be?; and 3) how long are you willing to wait for your money?