Saving and Investing

Mr. MizakEconomicsFall 2009

Saving

• Define: setting aside of income for a period of time so it can be used later

• Is saving a good thing for an individual?• Is saving good for the entire economy?• Answer to both = YES• When people save, money can be provided for

others to invest or businesses to grow

Where can you save?

• 1) Under your mattress– Pros/Cons2) Savings bank

- Pros/ConsStatement savings account- At the end of each

month, individual gets a statement showing all transactions.

This is what most people use

• Money Market Account- MMDA pays higher rates of indterest– Trade-off = requite 1,000 to 2,500 minimum

balance and limited number of checks that can be used per month

• Time Deposits – Certificates of deposit (CD) offer higher interest

rates but money must be left untouched for a set period of time (3 months-8 years)

Is your money safe?

• What happened in 1929?

• After the stock market collapse many peopls’s savings were wiped out.

• Out of fear, people rushed to the banks to withdrawal all their money

• Often this would cause banks to fail

FDIC

• In response, Congress passed the Federal Deposit Insurance Corporation (FDIC)

• Depositor’s money is protected up to $100,000.

• If an insured institution fails, each depositor will be paid the full amount of their savings up to $100,000.