Financial Literacy

accounts, saving, investing & interest

saving

when you put money aside for future use

investing

the process of buying an investment product with the goal of making more money overtime

investment types

stocks, bonds, mutual funds

types of accounts

savings, checking, mutual funds, CD, TFSA

savings account

account put money aside for later, provides deposits and withdrawals, money earns interest

checking account

bank account for everyday transactions

mutual fund

owning parts of many different companies, if one company does poorly it won’t affect you as much

certificate of deposit / CD

when you put money in an account for a fixed period of time at a fixed interest rate, grows your money but takes time

tax free savings account / TFSA

a savings account that is tax free

when you save your money in bank account, you will earn…

interest

interest

amount of money that the bank gives you for investing your money with them

simple interest

amount earned on the principal amount after investing for a certain number of time at a fixed interest rate

compound interest

Interest that accumulates over time. You get paid for the amount on the principal investment as well as any interest you earn along the way.

simple interest formula

I = P x R x T

compound interest formula

A = P ( 1 + r/n ) ^nt

A

final value/total

P

principal

r

annual interest rate in decimal form

t

term of the investment/loan in years

n

number of compounding periods in a year