You may get money for your birthday, holidays, washing windows or mowing the lawn, or as an allowance. When you get money, you can do three things: spend it, share it or save it.
Often, spending money right away is fun. Sometimes you want to buy something that costs more than the amount of money you have. Then you need to plan to save your money until you have enough to make your purchase.
To save means to keep for future use. You always should try to pay yourself before you pay for your expenses. The most common suggestion is to save 10% of your income; however, any savings is better than no savings.
You can save your money in a piggy bank, or in a savings account. If you do not have a savings account, ask your mom and dad for help in opening one.
While your money is in a savings account, the bank adds interest to it. Interest is money that the bank pays you for keeping money in the bank. The bank adds interest to your savings account as it is earned. The bank may loan your money to someone else, but you always will be able to get your money when you need it.
For example, when you save enough money to make your special purchase, you will need to go to the bank. You can withdraw your money from the bank when you need it, but first you must get your parents’ permission. Try not to make too many withdrawals.
You can use a recording book to keep track of your deposits and withdrawals. You may receive a paper monthly statement of your account or have access electronically.
To calculate the amount of simple interest you have earned, you need to know the principal, rate and time. Principal is the amount of money you are saving, rate is the amount of money paid to you by a financial institution for saving and time is the about of time the principal is saved.
Compounding interest occurs when the interest earned remains in your account. You will earn interest on the principal plus on the interest you’ve earned in the past.
Try setting goals and saving money to reach those goals. They are habits that you can learn and use throughout your lifetime.