Lauren Christiansen

Math 1030
12/2/15
Final Project
In this world today money is needed in our everyday lives. Money is needed to buy food,
housing, education, clothing, power, gas, or anything else you can think of to purchase. The
amount we can buy is partially determined by the amount of money we make, and have saved.
Though we use this money every day we still need to find a way to save for the future. Savings
are important to everyone whether its for a family vacation, in case unexpected emergency, a
house, or a retirement plan. It is always smart to save for the future. Saving for the future reduces
the amount of stress one would experience by living paycheck to paycheck. Saving money can
be done in many ways depending on ones circumstances. Some of the ways you can save money
in a bank, are a saving account with simple interest, savings account with compound interest,
checking account, certificates of deposit (CD), or money market account.
For each method of saving money in the bank there are pros and cons. To understand the
pros and cons of each

Annual Cost in Salt Lake City, Utah

account a set budget will

Housing

$7,068

Food

$3,249

Transportation

$5,705

Utah the average wage per

Health Care

$2,812

year is $31,065. If we

take out all the expenses

Taxes

$4,726

for one adult living off

Other Necessities

$4,983

Total:

$28,544

be made to show how each

when investing money into

this salary (see expenses to

that these expenses add up

of these accounts works

them. In Salt Lake City,

the right) we can see

to be $28,544 per year.

To calculate the amount, we have left over we subtract $28,544 from $31,065 which gives us
$2,521. Which means $2,521/12 we have approximately $210.08 left over each month.

Budget Of The Average Wage (Annually)

8%
Housing

Food

23%

Transportation 16%
Health Care

Taxes

Other Necessities

Savings

10%

15%
9%

18%

Savings Account with Simple Interest

Simple Interest is
earning interest on the

A = Future Value
P = Principle

the bank. So if you put $200

$4 in interest. You still only
original $200.

The formula for calculating

T

when your savings are only

original amount you put into
in and over time you made

R = Annual interest rate

are earning interest for that

N = Number of times per year

we Compound interest
T = Time In years
I = Interest
PMT = Payment

simple interest is: I= P x R x

The average interest rate in Salt lake City, Utah is 0.06. So if we use the average amount of
money a person makes in Salt Lake City, Utah left after all expenses are taken care of which is
the $2,521 per year.

If you left the $2,521 in the savings account for

1 year:

5 years:

10 years:

I= P x R x T

I= P x R x T

I= P x R x T

I= 2,521 x 0.06 x 1

I= 2,521 x 0.06 x 5

I= 2,521 x 0.06 x 10

I = $151.26

I= $756.30

I= $1,512.60

Total Amount in your

Total Amount in your

Total Amount in your

account: $2,672.26

account: $3,277.30

account: $4,033.60

If each year you were to add another $2,521 then the total amount in your account each year
would be

1 year :

5 years:

10 years:

I= P x R x T

I= P x R x T

I= P x R x T

I= 2,521 x 0.06 x 1

I= 2,521 x 0.06 x 5

I= 2,521 x 0.06 x 10

I = $151.26

I= $756.30

I= $1,512.60

$2,521+ $151.26= $2,672.26

$756.30 x 5= $3,781.50

$1,512.60 x 5= $7563

Total Amount in your

P= $2,521 x 5= $12,605

P= $2,521 x 10 = $25,210

account: $2,672.26

$3,781.50+ $12,605=

$7563 + $25,210= $32,773

$16,386.50

Total Amount in your

Total Amount in your account:

account: $32,773

$16,386.50

Savings Account with Compound Interest

Compound interest is when your savings not only earn interest on your original amount
but it also compounds and earns interest on the interest you earned before the compounding date.
For example if you put $400 into a bank and over time it makes $10 in interest. You will be
earing interest on the $410 instead of just the $400.

The formula for compound interest is: A=P (1+ R/N) ^ NT

The average interest rate in Salt lake City, Utah is 0.06. So if we use the average amount of
money a person makes in Salt Lake City, Utah left after all expenses are taken care of which is
the $2,521 per year.

If you left the $2,521 in the Savings account for

1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A= 2,521(1+ 0.06/12)^12 x 1

A= 2,521(1+ 0.06/12)^12 x 5

A= 2,521(1+ 0.06/12)^12 x 10

A= $2,676.48

A= $3,400.45

A= $4,586.69

If each month you were to add another $210 then the total amount in your account each year
would be
1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A= ( P(1+R/N)^NT ) +((PMT x

A= ( P(1+R/N)^NT ) +((PMT x

A= 2,521(1+ 0.06/12)^12 x 1

(((1 + R/N)^NT - 1) / (R/N)) )

(((1 + R/N)^NT - 1) / (R/N)) )

A= (2,521(1+ 0.06/12)^12 x 5)

A= (2,521(1+ 0.06/12)^12 x 10)

+ (210 x (((1+0.06/12)^12 x 5

+ (210 x (((1+0.06/12)^12 x 10

-1) / (0.06/12)))

-1) / (0.06/12)))

A= $18,052.15

A= $39,001.36

A= $2,676.48

Checking Account

A Checking account allows for unlimited withdrawals and deposits but usually has no
interest rate. People like using a checking account because there is so many ways to withdraw
money from it such as checks, ATM, etc.

The formula for a checking account is A=P

If you left the $2,521 in the account for

1 year:

5 years:

10 years:

A=P

A=P

A=P

A=$2,521

A=$2,521

A=$2,521

If each year you were to add another $2,521 then the total amount in your account each year
would be
1 year:

5 years:

10 years:

A=P

A=P x 5

A=P x 10

A=$2,521

A=2521 x 5

A=2521 x 10

A= $12,605

A= $25,210

Certificates of Deposit (CD)

A certificate of deposit is a deposit you leave in the bank for a certain amount of time.
Taking the money out before the time is up can lead to penalties. They usually offer higher
interest rates than a savings account because the money is locked away for the amount you
signed your contract. Certificates of deposit are also backed by the Federal Deposit Insurance

Corp. for up to $250,000 in case of any problems in the bank. Usually require at least $1000 to
remain in the account.

The formula for Certificates of Deposit is: A=P (1+ R/N) ^ NT

The average interest rate for Certificate of deposit in Salt lake City, Utah is 0.1. So if we use the
average amount of money a person makes in Salt Lake City, Utah left after all expenses are taken
care of which is the $2,521 per year.

If you left the $2,521 in the account for

1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A=2521(1 +0.1/12)^12 x 1

A= 2,521(1+ 0.1/12)^12 x 5

A= 2,521(1+ 0.1/12)^12 x 10

A= $2784.89

A=$4147.82

A= $6824.45

If each month you were to add another $210 then the total amount in your account each year
would be

1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A= ( P(1+R/N)^NT ) +((PMT x

A= ( P(1+R/N)^NT ) +((PMT x

A= 2,521(1+ 0.1/12)^12 x 1

(((1 + R/N)^NT - 1) / (R/N)) )

(((1 + R/N)^NT - 1) / (R/N)) )

A= $2784.89

A= (2,521(1+ 0.1/12)^12 x 5) +

A= (2,521(1+ 0.1/12)^12 x 10) +

(210 x (((1+0.1/12)^12 x 5 -1) /

(210 x (((1+0.1/12)^12 x 10 -1) /

(0.1/12)))

(0.1/12)))

A= $20,409.60

A= $49,841.89

Money Market Account

A money market account is an account that you put savings into but can only withdraw
the savings six times a month. It is less accessible than a savings account but more so that a
certificate of deposit. Money Market accounts are also backed by the Federal Deposit Insurance
Corp. for up to $250,000 in case of any problems in the bank. They usually have a higher interest
than a savings account but a lower interest than a certificate of deposit. They require a fairly
large amount of money in the bank to avoid fees.

The formula for Money Market Account is: A=P (1+ R/N) ^ NT

The average interest rate for Money market account in Salt lake City, Utah is 0.085. So if we use
the average amount of money a person makes in Salt Lake City, Utah left after all expenses are
taken care of which is the $2,521 per year.

If you left the $2,521 in the account for

1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A=P (1+ R/N) ^ NT

A= 2,521(1+ 0.085/12)^12 x 1

A= 2,521(1+ 0.085/12)^12 x 5

A= 2,521(1+ 0.085/12)^12 x 10

A= $2743.83

A=3,850.32

A= $5,880.60

If each month you were to add another $210 then the total amount in your account each year
would be
1 year:

5 years:

10 years:

A=P (1+ R/N) ^ NT

A= ( P(1+R/N)^NT ) +((PMT x

A= ( P(1+R/N)^NT ) +((PMT x

A= 2,521(1+ 0.085/12)^12 x 1

(((1 + R/N)^NT - 1) / (R/N)) )

(((1 + R/N)^NT - 1) / (R/N)) )

A= $2,743.83

A= (2,521(1+ 0.085/12)^12 x 5)

A= (2,521(1+ 0.085/12)^12 x

+ (210 x (((1+0.085/12)^12 x 5

10) + (210 x (((1+0.085/12)^12

-1) / (0.085/12)))

x 10 -1) / (0.085/12)))

A= $19,483.23

A= $45,389.67

Each of these bank accounts have benefits and drawbacks to them depending on your
budget and income. For the average person in Utah each of these bank accounts will gain money
or remain the same. It depends on your circumstance which one you use and will be most
beneficial to you. It is a good idea to save for the future in case of unforeseen circumstances, and
is less stressful than living paycheck to paycheck. These are just some of the ways you can save
your money in the bank. The ways I have listed are a saving account with simple interest, savings
account with compound interest, checking account, certificates of deposit (CD), or money
market account. It is smart to research which account is right for you. This is how the average
Utahans savings respond with each account.

If you Leave $2,521 In The Account

8000
7000
6000
5000

Money

4000
3000
2000
1000
0

10

Time (Years)
Simple

Compound

CD

Money Market Account

Cheaking Account

Adding $2,521 Per Year

60000
50000
40000

Money

30000
20000
10000
0

10

Time (years)
Simple

Compound

CD

Money Market Account

Cheaking Account