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Consumers & Savers A consumer is anyone who buys goods or services for personal use. Consumer spending is the biggest component of total spending in the U.S. economy. Sources of Income from work – wages, salary Income from wealth – interest, capital gains How can you accumulate wealth? Save. How much people save depends on their income, their expectations, interest rates, & tax laws. Income Saving Create a budget: set financial goals, estimate income, estimate expenditures. Factors to consider: safety, rate of return, liquidity. Where people put their savings: savings accounts, certificates of deposit, money market, pension funds, corporate stocks, U.S. savings bonds, other government securities, mutual funds, corporate bonds, real estate, insurance. Consumer Credit Consumer credit enables you to enjoy goods & services before you pay for them fully. There are two strings attached to every credit purchase: you must repay the principal (the amount borrowed) & interest plus other costs. Consumer credit is either loan credit (borrow money to finance a purchase) or sales credit (buy goods & services now & pay for them later). Kinds of credit: home mortgages, auto & consumer loans, charge accounts, credit cards. Terms to know Stocks – represent ownership in a business Bonds – are certificates of a corporation’s or the government’s indebtedness to the holder – a loan to be repaid with interest. Dow Jones Industrial Average – one of several indices that serves as a pulse on the market The SEC – Securities & Exchange Commission is a federal agency responsible for protecting investors in the sale of securities Money can be anything that is generally accepted in payment for goods & services Money plays three roles: it serves as a medium of exchange, a store of value, & a measure of prices. Money, as a practical matter, should have the following qualities: Stability Portability Durability Uniformity Divisibility Recognizability The Federal Reserve System is the nation’s banking system It is responsible for issuing paper currency, regulating the quantity of money in circulation, & with other agencies, supervising commercial banks. It consists of 12 District Banks, a Board of Governors, the Federal Open Market Committee, & three advisory councils.