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Saving Money in Plain English
Duration:
3 minutes and 49 seconds
Country:
United States
Language:
English
Genre:
Instructional
Producer:
Common Craft, LLC
Director:
Lee LeFever
Views:
5,556
(3,431
embedded)
Posted by:
leelefever on Jan 7, 2009
A short guide to how compound interest can help money grow over time. www.commoncraft.com/show
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Video Transcription
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- Take just a minute, and think about the future you'd like to have.
- To get there, you need to be responsible
- and save your money so that it grows over time.
- This is Saving Money in Plain English.
- Meet Jasmine. She's 20 years old, and her goal is to buy a home in the future.
- Jasmine is already saving for that future home purchase
- and recently learned how to save responsibly.
- When she was younger, she had a piggy bank and often added money to it.
- The problem with a piggy bank was that her money just sat there.
- She got out the same amount she put in.
- Instead of using a piggy bank,
- Jasmine found a way to help her money grow over time
- by saving it in a bank or credit union,
- where she can easily get it back when she needs it.
- While it's there,
- the bank uses her money to help other customers who need to borrow money.
- It's like Jasmine is loaning her money to the bank.
- Because she's helping the bank,
- they add a little extra money to her account automatically.
- It's these payments from the bank that help her money grow over time.
- This extra money is called "interest",
- and it's paid to Jasmine over the course of a year.
- The amount of interest she earns is based on two things:
- The amount she has in the bank,
- and the Annual Percentage Yield or APY, which is a rate set by the bank.
- Here's how they work together.
- Let's say you deposit $100 in a savings account with a 3% APY.
- That $100 will earn $3 in interest over the course of a year.
- Now, you could take that $3 in interest and buy a latte.
- But you decide to leave it in the bank.
- This way you have more money in the bank, and earn interest on $103 instead of $100.
- As long as you leave it alone, your money will grow even faster
- because the interest adds up year after year.
- It's called "compound interest"
- and this simple idea will help Jasmine buy a home. Here's how.
- In her piggy bank, Jasmine has saved $5,000.
- But for the home she wants, she knows she'll need more,
- and realizes that smart saving is all about thinking long term.
- If she deposits this in a bank, and earn 3% APY,
- that $5,000 would become $9,000 in 20 years.
- That's $4,000 more thanks to compound interest.
- $9,000 is good, but it may not be enough.
- To help her money grow even faster,
- Jasmine decides that she can add $100 to her savings each month.
- That's $1,200 a year - even more money to earn interest!
- This will be a huge help. Jasmine can see she's getting close.
- With the $5,000 she has saved,
- plus the money she adds monthly,
- she can save $29,000 over 20 years, if she saved it in a piggy bank.
- But with compound interest from her bank,
- that $29,000 could become over $42,000 in 20 years.
- A nice start on buying her dream home!
- All she had to do was add money to her savings regularly, and watch it grow! Yay!
- If you're ready to save responsibly,
- visit a bank or credit union
- and talk with a financial professional about APYs and savings.
- The keys to smart saving are to start today,
- add money regularly,
- and watch how compound interest can help your money grow and grow.
- I'm Lee LeFever and this has been Saving Money in Plain English
- on the Common Craft Show.
- One more thing,
- you can download presentation quality versions of our videos
- without ads like this,
- in the Common Craft Store.


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