Consumers & SaversConsumers & Savers

A A consumer consumer is anyone who buys is anyone who buys goods or services for personal goods or services for personal use. Consumer spending is the use. Consumer spending is the biggest component of total biggest component of total spending in the U.S. economy.spending in the U.S. economy.

Sources of IncomeSources of Income

Income from work – wages, salaryIncome from work – wages, salary Income from wealth – interest, capital Income from wealth – interest, capital

gainsgains

How can you accumulate wealth? Save. How can you accumulate wealth? Save. How much people save depends on their How much people save depends on their income, their expectations, interest rates, income, their expectations, interest rates, & tax laws.& tax laws.

SavingSaving

Create a Create a budgetbudget: set financial goals, estimate : set financial goals, estimate income, estimate expenditures.income, estimate expenditures.

Factors to consider: safety, rate of Factors to consider: safety, rate of returnreturn, , liquidityliquidity..

Where people put their savings: savings Where people put their savings: savings accounts, certificates of deposit, money market, accounts, certificates of deposit, money market, pension funds, corporate stocks, U.S. savings pension funds, corporate stocks, U.S. savings bonds, other government securities, mutual bonds, other government securities, mutual funds, corporate bonds, real estate, insurance.funds, corporate bonds, real estate, insurance.

Consumer CreditConsumer Credit

Consumer credit enables you to enjoy goods & Consumer credit enables you to enjoy goods & services before you pay for them fully.services before you pay for them fully.

There are two strings attached to every credit There are two strings attached to every credit purchase: you must repay the purchase: you must repay the principalprincipal (the (the amount borrowed) & amount borrowed) & interestinterest plus other costs. plus other costs.

Consumer credit is either loan credit (borrow Consumer credit is either loan credit (borrow money to finance a purchase) or sales credit money to finance a purchase) or sales credit (buy goods & services now & pay for them (buy goods & services now & pay for them later).later).

Kinds of credit: home mortgages, auto & Kinds of credit: home mortgages, auto & consumer loans, charge accounts, credit cards.consumer loans, charge accounts, credit cards.

Terms to knowTerms to know Stocks – represent ownership in a businessStocks – represent ownership in a business Bonds – are certificates of a corporation’s or the Bonds – are certificates of a corporation’s or the

government’s indebtedness to the holder – a government’s indebtedness to the holder – a loan to be repaid with interest.loan to be repaid with interest.

Dow Jones Industrial Average – one of several Dow Jones Industrial Average – one of several indices that serves as a pulse on the marketindices that serves as a pulse on the market

The SEC – Securities & Exchange Commission The SEC – Securities & Exchange Commission is a federal agency responsible for protecting is a federal agency responsible for protecting investors in the sale of securitiesinvestors in the sale of securities

Money Money can be anything that is generally accepted in can be anything that is generally accepted in

payment for goods & servicespayment for goods & services

Money plays three roles: it serves as a medium Money plays three roles: it serves as a medium of exchange, a store of value, & a measure of of exchange, a store of value, & a measure of prices.prices.

Money, as a practical matter, should have the Money, as a practical matter, should have the following qualities:following qualities:

StabilityStability UniformityUniformity

PortabilityPortability DivisibilityDivisibility

DurabilityDurability RecognizabilityRecognizability

The Federal Reserve SystemThe Federal Reserve Systemis the nation’s banking systemis the nation’s banking system

It is responsible for issuing paper It is responsible for issuing paper currency, regulating the quantity of money currency, regulating the quantity of money in circulation, & with other agencies, in circulation, & with other agencies, supervising commercial banks.supervising commercial banks.

It consists of 12 District Banks, a Board of It consists of 12 District Banks, a Board of Governors, the Federal Open Market Governors, the Federal Open Market Committee, & three advisory councils.Committee, & three advisory councils.