Reaching the Unbanked and Underserved Across America The Alliance for Economic Inclusion (AEI) is the FDIC’s national initiative to establish broad-based coalitions of financial institutions, community-based organizations and other partners in several markets across the country to bring all unbanked and underserved populations into the financial mainstream. The focus is on expanding basic retail financial services for underserved populations, including savings accounts, affordable remittance products, small-dollar loan programs, targeted financial education programs, alternative delivery channels and other asset-building programs. The FDIC continues to expand its AEI efforts to increase measurable results in the areas of new bank accounts, small-dollar loan products, remittance products, and delivery of financial education to more underserved consumers. For example, during calendar year 2011, over 494 banks and organizations joined AEI nationwide, bringing the total number of AEI members nationwide to 1,613. More than 404,591 new bank accounts have been opened; more than 270,476 consumers have been provided financial education. Twenty-four banks are in the process of offering or developing small-dollar loans, and seventeen AEI banks are providing deposit accounts consistent with the FDIC Model Safe Account Template through the AEI. ]]>
Saving differs from savings. The former refers to the act of increasing one’s assets, whereas the latter refers to one part of one’s assets, usually deposits in savings accounts, or to all of one’s assets. Saving refers to an activity occurring over time.
When setting up a savings plan, it’s a good idea to think about more than just how much money you’ll need in the future. You should also be looking at ways your money can earn more money for you.Fortunately, this is a lot easier than it sounds. In fact, just about the only way you can keep from earning more money with your savings is to put it under your bed or in a safe. If you take your money to a bank you can guarantee that over time you’ll make more money, and you won’t have to do a bit of work for it. That’s because banks offer interest. In exchange for opening an account and giving the bank your money, the bank agrees to increase your money by a certain percentage every year. For instance, if you were to take $100 and put it in an account that offers 6% interest, by the end of the year the bank will have given you six dollars. So, without doing anything, your savings has grown to $106. Best of all, it’s risk free. The federal government guarantees your deposits. Even if the bank goes bankrupt, you’ll get your money back. Compound Interest At first, interest might not seem like a lot of money. But it grows over time. And it can add up very quickly – thanks to a powerful moneymaking tool known as compound interest. Put simply, this is interest earned on interest. Let’s look again at that $100 in an account earning 6% interest. The $106 you have after the first year would earn 6% again the next year — $6.36, or a 36 cent increase. After you add that to the total, you would have $112.36. And that new total will then earn 6% the following year — $6.74, another increase. As long as you leave the money in there, it will keep earning more. If you left that same $100 in a 6% interest account for 40 years, you’d have $1,028, and your annual interest earnings would be more than $50 per year. The Rule of 72 One simple way to see the power of compound interest is through the “rule of 72.” It’s a formula for figuring out how quickly your money will double if left alone in an interest bearing account. All you have to do is divide 72 by the interest rate. So if your rate is 6%, divide 72 by 6. At that rate, it will take 12 years to double your money. Big Money Still not impressed? Sure, 12 years is a long time to double your money. But that’s only if you put your money in once and leave it. If you keep contributing, your money will really grow. Consider that 6% account one more time. If you were to put in another $100 each year for 40 years, you’d wind up with $17,433 and you’d be earning more than $1,000 in interest. It really pays to start saving early and regularly. Read the Fine Print Just as banks give, they can take away. If you’re not careful, penalties and fees can cut into your interest. Sometimes they even eat into your actual savings. So it’s important to read the fine print when you open an account so you can know where the potential pitfalls might lie. Watch out for:
- Fees, charges, and penalties. These are usually based on minimum balance requirements, but they can also be attached to transactions such as ATM withdrawals and online transfers.
- Interest thresholds. Some accounts require minimum balances before they even begin paying interest.
- Variable interest rates. Some accounts – most often money-market accounts – will pay different interest rates for different size balances, with higher balances earning higher rates.
If you want to receive financial aid, you’re going to need either a High School Diploma, G.E.D. or High School Equivalency (HiSet).