VCU HUMS 202 - HUMS 202 Module5 (4 pages)

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HUMS 202 Module5



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HUMS 202 Module5

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Pages:
4
School:
Virginia Commonwealth University
Course:
Hums 202 - Choices in Consumer Society
Choices in Consumer Society Documents

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HUMS 202 Module 5 Pay Yourself First What you can do to start saving o Differentiate between spending for needs and wants Cut back on unnecessary spending Such as food monthly subscriptions and other expenses o Pay bills on time to avoid monthly fees o Shop around including for financial services Consider opening a checking account instead of using check cashing services Shop for the account that best meets your needs o Monitor your bank accounts to avoid fees Keep track of how much money is in your checking account Don t forget to record debit card purchases o Have part of your paycheck direct deposited into a savings account or ask your bank how to establish automatic transfer to savings o Keep making the monthly payments to yourself once you have paid off a loan o Save atleast part of any cash gift bonus or raise How your money can grow o Interest Amount of money banks or other financial institutions pay you for keeping money on deposit with them Expressed as a percentage Calculated based on the amount of money in your account o Compounding How your money can grow when you keep it in a financial institutions that pays interest Annual Compounding Start with 1000 at 1 compounded annually At the end of the first day you still have 1000 At the end of the year you have 1010 o 10 or 1 of 1000 is added to your original budget o TOTAL 1010 00 Daily compounding Start with 1000 at 1 compounded daily At the end of the first day you have 1000 03 On the second day add the interest earned 03 and the compounded total amount 1000 03 At the end of the year you have 1010 05 o Rule of 72 Divide 72 by the current interest rate to estimate the number of years that it will take to double your initial savings amount o Saving Options Two types of tools to help you grow and save money Bank deposit accounts o You can make money by earning interest The bank pays you for the opportunity to use your money o o Your money is safe Since the creation of the FDIC in 1934 no depositor has every



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