How to Save Page 1
How to Save
Ways To Save Your Money Without Losing Purchasing Power To Inflation
University of the People
1104 Macroeconomics
Instructor: Getachew Woldie
Due: Wednesday, 6 May 2015
How to Save Page 2
A man seeking financial advice said to his friend, “I need to start saving some of my income and want it to retain as much value as possible, what are my options?”
“You have five main saving options.” Replied his friend. “Cash, checking accounts, savings accounts, bonds, or stocks. When saving you must keep inflation in mind. In order for your savings to retain their value they must at least keep pace with inflation rates. If you wisely invest your savings, then you can actually make a profit with it.
The average rate of
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You can easily get a checking account that has no fees or minimum balance requirements. A checking account is only a small step above cash when it comes to saving. A checking account is less risky as it protects your money in the bank from being stolen, etc., but it does not protect your capital from inflation. It is also nearly as liquid as cash and is thus a fairly similar option.
Savings Accounts
Saving accounts, your third option is a step up from the last two options, but not by much. Like the checking account you can get a saving account from most banks. The average savings account has a 0.06% APY, annual
How to Save Page 3 percentage yield, or interest. Thus a savings account is low risk and fairly liquid like cash or a checking account, but still does not keep up with inflation rates.
Bonds
Bonds, the fourth option also have their pros and cons. A bond is essentially a certain amount of money lent to a company or business for a set amount of time. A bond issuer such as the US Treasury first decides that they need say $1 million, they then divide it up into say $1,000 sections (the price of a bond is determined by supply and demand). Bond holders buy those bonds and at the end of a period they turn their bonds in to receive their initial amount back plus some interest. The amount of interest the holder receives is based on the riskiness of the bond and the market rates. The benefits of bond holding are the interest which can help counteract the
Bonds require a minimum amount of money to purchase and a minimum length of time to hold on to the bond.
• I would probably stick with bank of America because it seems cheapest and safe.
There are organizations that decide to issue bonds in most cases go through a series of six steps:
c. List three facts about checking account options at the bank or credit union you chose. (3 sentences. 1.0 points)
The first bank I researched was Municipal Credit Union. Municipal Credit Union is a state chartered credit union headquartered in New York City, regulated under the authority of the National Credit Union Administration. After investigating its financial services and products on the website, I found that they offer checking accounts, credit cards, CDs, mortgages, home equity loans (line of credit), and IRAs. The benefits to customers involve free online banking with bill pay and eStatements, a
Jim Crow laws does not play a role really in today's time, but there is still some racial problems. Predominantly white schools sometimes have better education systems, and get paid more on a job than any other race. Sometimes mostly black/Hispanic (lower) communities look nicer than a community with mostly white or higher income communities.
c. List three facts about checking account options at the bank or credit union you chose. (3 sentences. 1.0 points)
It provides an evaluation of the bond issuer’s financial strength and ability to pay back the bond’s principle and interest. The bond rating also provides investors with some sense of security when investing in a particular firm. A higher bond rating implies a lower likelihood for the firm to default. Investors would feel more secured investing in such a bond, thus demanding a relatively lower rate of return. As such, high rated bonds enable the issuer to enjoy a lower cost of borrowing. A lower bond rating, on the other hand, serves as a negative signal to investors on the firm’s ability to repay debt obligations.
Perhaps the most advantageous time to hold cash is when a recession hits and the economy starts to slow down.
b. List three facts about savings account options at the bank or credit union you chose. (3 sentences. 1.0 points)
Many government related institutions issue bonds, some supported by the revenues of a specific institution and some guaranteed by a government sponsor. For example, in Canada they have a bank that issue bonds that are guaranteed by the
There are many different ways to save money and there are different things to save for. A savings plan for an immediate want is apparently different than a savings strategy for retirement. One may choose to select stocks, bonds, or mutual funds for a savings strategy, however, my personal choice is to invest in bonds first, then mutual funds.
If you use direct deposit and automatically transfer $10 per week into a savings account, you can save $500 in a
3. Begin with 3% of your pay going into retirement savings. Each raise/promotion you get increase it by 1% until you have reached your employer’s maximum match rate. Then add the 1% into an IRA until you have reached the percentage that results in your desired retirement account.
Saving money is an important part of your financial health. The more you save, the more you can feel at ease whenever a rainy day might hit. You cannot predict the future but you can prepare for it. If you prepare now, your future self will thank you. But how can you save if you have so many bills and only one stream of income? Here are some tips you can use to rack up that account with a single income.