Friday, 6 February

Reminder that the first part of My Future (Financial) History is due next week.

Class continued looking at "typical" person's timeline.

We then studied the effect of compounding interest on investments and debts using the following chart. This chart is due next class.

Principle    Interest    Credit    Debt

Name _________________________________________ Date __________________ Period _______

Principle; Interest; Credit; and Debt are related words. In order to study these words you should recognize and understand some conventions used by many people when dealing with finances. Negative numbers, we’ll refer to these as “debt” (unless you are an accounting person) are often written like this: ($1,000); you are most likely used to thinking of this as -10,000. (Also, negative numbers are often displayed in the color red. Positive numbers in these cases are usually black.)

Principle is an amount of money that one starts with. Sometimes it is a debt as when it is an amount borrowed.

Three common reasons to borrow money:

Sometimes it is a positive number as when it is invested.

Three  common ways people invest money:

Interest is a percent increase in an investment or (debt). Interest usually “compounds” which means that it increase and also increases based on it’s previous increase. (Interest that only increases on the original principle is called “simple interest”).

The power of “compounding interest” is significant. Complete the tables below in order to understand the power of compounding.

		Interest	Interest	Investment	Debt / Loan	Investment	Debt / Loan
	Reason	Savings (compounding)	Saving (simple)
Principle: beginning amount		$100.00	$100.00
Interest rate (paid) or earned		2%
	1	$102.00
	2	$104.04
	3	$106.12
	4	$108.24
	5	$110.41
	6	$112.61
	7	$114.87
	8	$117.16
	9	$119.51
	10	$121.90
Principle		$100.00
Line 10- Principle = Total earned or total cost		$21.90