ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Savings accounts pay a higher rate of interest.
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Savings accounts are easier to acquire.
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Savings accounts can be used to guarantee loans.
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Savings accounts provide more protection for your money.
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Detailed explanation-1: -Compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on your original principal. Compounding can create a snowball effect, as the original investments plus the income earned from those investments grow together.
Detailed explanation-2: -Because savings accounts are not made for everyday transactions, you can store money in the account for longer to collect interest. Savings accounts-especially high-yield savings accounts-typically offer higher annual percentage yields (APYs) than checking accounts, allowing you to grow your money faster.
Detailed explanation-3: -Compound interest is often best when you’re saving money because you’ll earn interest on interest. But if you’re taking out a loan, a simple interest loan may be the better option since it could lead to less costs overall.
Detailed explanation-4: -With compound interest, any interest is added to the principal, and interest is then calculated on the new total. Compound interest can accelerate your savings, especially over the long term.