Choose to Save Advanced Level

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is Saving? Saving – accumulation of excess funds by intentionally spending less than you earn Savings – portion of income not spent on consumption (purchase of goods and services) Results in

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Why Save? Emergency savings Cash set aside to cover the cost of unexpected events Short-term goals & expenses Pay for items that aren’t part of a typical spending plan Financial security Lower stress Lower negative emotions Your present self impacts your future self By saving money today you will have financial security in the future What are examples of emergency expenses?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Saving Reduces Financial Risk and Uncertainty Very liquid (can quickly and easily be converted into cash) Savings is a monetary asset Contributes to net worth What monetary assets do you have for emergencies?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How Much Money Should Be Saved? At least six months worth of expenses in emergency savings $2,000 monthly expenses 6 months$12,000 Depends on… Dependents

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Saving on an Income & Expense Statement Saving is a form of unearned income when used to pay for an expense Saving is an expense when money is being saved

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona My Saving Quest Part 1: My Wish List $ $$ Brainstorm a personal wish list for yourself Approximately how much does each item cost? Place a star  next to the item you would like to start saving for today

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Identifying Money to Save Examine current spending What changes can you make to reduce current spending? Ask yourself if items are a need or a want Consider small, often daily, expenses Consider large, often monthly, expenses What are ways to reduce spending?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Identifying Money to Save Increase Income Decrease Expenses Do It Yourself Instead of paying someoneTrade-offInvesting time and skills What can you do yourself to save money?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Create a Savings Plan Set a goal! What are you saving for? How much needs to be saved? How can the goal be achieved? Is the goal realistic? When will the goal be reached?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Make Sure Your Goal is Realistic! Ensure the trade-offs are realistic and opportunity cost of what is given up to save is not too high! Saving money for future Giving up the purchase of something in the present Why can saving be difficult?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona My Saving Quest Part 2: My Current Spending Trade-off Identify three changes you will make to your current income or spending today to start saving for the future What is the trade-off for each change?Place a star  next to items with a realistic opportunity cost

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Pay Yourself First Save a predetermined amount of money Do so before using money for spending Do so each time you are paid Make it automatic! Your present self impacts you future self!

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Saved Money Provides For Your Future Self…. Time Value of Money - money available at the present time (today) is worth more than the same amount if received in the future Time Value of Money - money available at the present time (today) is worth more than the same amount if received in the future Interest Rate Money Time … and can increase in value!

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is Interest? Interest – the price paid for using someone else’s money. Interest rate – percentage rate used to calculate interest Interest may be earned or paid Depository institutions offer secure accounts to save money When you don’t withdraw interest earned from an account the interest earns additional interest Compounding interest – earning interest on interest Interest - the price of money Interest rate - percentage rate used to calculate interest Compounding interest – earning interest on interest

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How Do Interest Rates Affect The Time Value of Money? Interest Rate More Money Earned $1,000 Saved for 5 Years with Compounding Interest

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Time More Money Earned How Does Time Affect the Time Value of Money? Felix and his parents Saved for: 18 years Started when he was born Contributed: $50/month Total Contribution: $10,800 Savannah and her parents Saved for: 4 years Started when she was a freshman Contributed: $350/month Total Contribution: $16,800 Both earned the same interest rate Both currently have the same balance (about $19,500) Savannah’s parents contributed significantly more College Savings Fund

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How Does Money Affect the Time Value of Money? Principal - original amount of money saved or invested Money More Money Earned 3% interest for 5 years PrincipalValue of Savings $100$ $1,000$1, $10,000$11,592.74

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Year 5 Interest Earned: $33.26 Amount Investment is Worth: $ Year 10 Interest Earned: $56.46 Amount Investment is Worth: $ Year 15 Interest Earned: $79.19 Amount Investment is Worth: $ Year 20 Interest Earned: $ Amount Investment is Worth: $ Year 50 Interest Earned: $ Amount Investment is Worth: $ Time Value of Money Magic! Initial Investment (Principal): $ at 7% compounding interest Year 1 Interest Earned: $7.00 Amount Investment is Worth:

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Interest Rate Money Time Maximize Your Return! Save for as long as possible! Save as much as possible, as often as possible! Save at the highest interest rate possible!

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona My Saving Quest Part 3: Implementing My Saving Quest Write a goal Specific MeasurableAttainableRealisticTime-bound How will you make the saving process automatic?How much can you realistically save each week?How can your goal be reached using the time value of money?

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Savings is an Essential Component of a Financial Plan Reduces future financial uncertainty Reduces negative emotions Requires trade-offs be made Best accomplished when automatic Opportunity for savings to increase in value

2.4.1.G1 © Take Charge Today – August 2013– Choose to Save– Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Take A Chance Tracking Activity Step 1: Introduce Paycheck Stub…..enter on income and expense statement Step 2: With a partner complete the Actual Amount Spent for the Month of May. Calculate the total expense and subtract from the total income. Do you have a net gain or net loss? Calculate the difference for each category in the difference column. Step 3: Reflect/Answer the questions REMEMBER TO COME GET A CHANCE CARD