Types of Savings Accounts

 

Sponsored by Discover and Discovery Education

 

Unit Overview

In this unit, “Types of Savings Accounts” you will learn about the impact that earning compound interest makes on a person’s savings and the difference it makes to start saving at a young age. The unit concludes with an exploration of various options for saving money and a comparison between saving and investing.

Section A – Growing Savings Through Interest

 

In this section, the module will help you answer why it is important to save money early. You will explore the power of compound interest by seeing how people who save small amounts early on increase their money.

        Click below to complete the module.

Let’s Practice

Compound Interest

This four-minute video provides an overview of what compound interest is and how it works. Graphs show the difference between simple and compound interest and the impact of starting to save early.

Ψ Compound Interest Concept Video

After watching the video above, answer the Video Questions below on a piece of scrap paper.

1.   Why do people keep money in banks, savings and loans, and credit unions?

a. These institutions are convenient.

b.  Deposits at these institutions are safe and earn interest

2.   What is interest?

a.  A tax refund to a household from the government

b.  Money paid by financial institutions on customers’ deposits

3.   What is the difference between simple interest and compound interest plans?

a.  Compound interest pays interest on interest already earned

b.  Interest earned in a simple interest plan cannot be taxed

4.   You deposit $100 at a 5% interest rate.  With compound interest, at the end of two years:

a.  Your savings account will have less than $110

b.  Your savings account will have more than $110

5.   What is a good way to increase your wealth through savings?

a.  start saving early

b.  make small deposits in your savings account

Ψ Video Questions Answer Key

       

Section B – Choosing a Savings Method

 

In this section, you will compare various savings methods, including certificates of deposit, savings accounts, and money market accounts, and consider the benefits and tradeoffs of each.

Click below to begin the module.

Let’s Practice

You’ll learn how interest can be calculated on a yearly, monthly, or even daily basis, and how the interest you accumulate is proportional to how much money you have in the bank. You’ll also learn the differences between simple interest and compound interest, and how to calculate each.

Click here to watch a video on Interest and complete the quiz.