investing

//"A penny saved is a penny earned"// - Benjamin Franklin



Photo courtesy of jpmatth

You've just finished celebrating at your graduation party and you sit down to count up all the cash you received. Thanks to the enormous amount of people your invited to the party and their extreme generosity, you raked in $6,500. Luckily for you, you didn't have to take out any college loans so the money is yours to do with as you please. Your parents offer the advice that you should save/invest the money. Let's take a look at what that could mean.

There are many different options that you could turn to, to help not just save your money but make it grow. We're going to play it safe and stick with the most popular options where you can only gain more money, not lose it.

1. Visit Financial Planning Advices to learn the difference between savings accounts and CD's.

2. Print out this worksheet. You will be turning it in at the end of your decision making.

3. Visit Bankrate.com to see the best current interest rates for CD's. You can change the Products selection to see the differing rates depending on the time period your money will be in the CD. Also pay attention to the minimum deposit needed, as you only have $6,500 maximum to put into the CD.

4. Use the worksheet to record your findings for the best interest rate. You will be looking at three different time periods to see how it affects your investment.

5. Also look at Bankrate.com's section on the best current interest rates for Money Market Accounts/Savings Accounts. For our purposes we'll consider MMAs to be the same as savings accounts. Savings accounts function a little bit differently than CD's in the fact that you can withdraw or deposit money from your account. We'll go with the idea that you won't take any money out of the account (withdrawals) during the time period you specify. For your rate, use the quoted rate and NOT APY.

6. Use the worksheet to record your findings for the best interest rate. You will be using the same three time periods as you did for CD's. You may choose, and I recommend, to make monthly contributions to your savings account. This would come from taking money from your paycheck and putting into your savings account. Decide on how much you will contribute monthly and use the same amount for each time period. Because this is a little different, you will be using this simulator from NCTM to help you calculate. Use the APY for your interest rate and NOT any intro rates or rates past intro.

7. It's decision time. Use your worksheet to record which investment option and time period you are choosing for investing your savings. Explain why you chose what you did.

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