A savings account can protect a family
from the above problems. If a family saves
only $10 a month, they can build up a
sizeable savings account in a short time.
Thus, they would have $100 available for
an emergency, and not have to pay a $60
finance charge. Unfortunately, all too
often, when money is tight, the savings
account is the first thing a family deletes
from its budget.
It is also important to begin saving for
retirement, especially when you are young.
In 2006, social security, which averages
$1,079 per month, was the largest source
of income for those currently 65 and older
accounting for nearly 40% of their
income. For many of those over 65, it was
their only source of income (McDonald,
2007). An example of the importance of
saving early for retirement is what can
happen to $100.00. Suppose you put
$100.00 a month into an account earning
8% interest for 5 years, starting at age 25.
Your friend Tom does exactly the same
thing, except he is 35 when he starts to
save. If you both stop investing after 5
years and hold your investment to age 60,
you will have $74,430.15 at age 60, while
your friend Tom will have $34,475.56.
Your investment would be almost double
Tom’s just because you started earlier.
That is the power of compounding
interest.Time, Energy, and Money: Managing Family Resourcesfee to extend the loan for another 2
weeks. In this example, the cost of
the initial loan was a $15 finance
charge, which is a whopping 391%
APR. If you rollover the loan three
times, the finance charge climbs to
$60 to borrow $100. Since partial
payments are not accepted, people
often end up at another payday loan
office to pay off the first loan, only
exacerbating the problem until they
are thousands of dollars in debt.