1. Introduction to Saving

2. Saving Basics
Savings is the portion of current income not spent on consumption.
Recommended to have a minimum of 3-6 months salary saved

3. Reasons People Should Save
Emergencies –minimum of three to six months of salary
illness
losing a job
replacing a large item (vehicle, appliances)
Expenses –money that is paid out for needs and wants
Future Purchases
college education
new car
down payment on a home
Investing- the purchase of assets with the goal of increasing future income
Giving- charity, gifts

4. Why People Don’t Save Current consumption needs and wants aren’t met
Do not know how much they need to be saving
Money in savings accounts earns poor interest rates
Don’t need emergency money because they have credit easily available
Have adequate insurance and job security

5. Saving vs. Investing Saving
Savings accounts are more liquid than investment accounts
Liquidity- how quickly and easily an asset can be converted into cash
Generally get a low interest rate, often barely meeting inflation
Inflation- steady rise in the general level of prices

6. Interest Interest – the amount of money that is either gained or lost
Interest rate – the percentage used annually to calculate the total interest either gained or lost 6

7. Saving vs. Investing cont.
The purchase of assets with the goal of increasing future income
Investments are not as liquid as savings
Rate of return, or annual return on an investment, including appreciation and dividends or interest
usually higher than savings account
Don’t start until saving plan in place

8. “Pay Yourself First”
Put money away into a savings account or investment BEFORE you pay other bills or use for spending.

9. 70-20-10 Rule Spend 70% of money you earn Save 20% of money you earn
Invest 10% of money you earn

10. Depository Institutions
Commercial Bank
Credit Union
Savings and Loan Association 10

11. Commercial Bank Commercial Banks Available to a variety of consumers
Usually the largest depository institutions
Considered full-service depository institutions because offer a wide variety of services and products
Available to a variety of consumers
Examples – Wells Fargo, US Bank, Chase Bank 11

12. Credit Union Credit Unions Owned by members who share a common bond
Non-profit cooperative depository institution
Owned by members who share a common bond
Examples – Rocky Mountain Credit Union, Teachers Federal Credit Union 12

13. Savings and Loan Association (S&Ls)
Focus on providing loans and mortgages
Customers must have a savings account with them
Examples – American Federal Savings Bank, Pioneer Federal Savings & Loan. 13

14. Types of Insurance Federal Deposit Insurance Corporation (FDIC)
Federal government agency which protects depository institution accounts
$100,000 basic accounts
$250,000 on retirement accounts
National Credit Union Administration (NCUA)
Provides insurance for credit unions 14

15. Banking Services 15

16. Common Services Offered
Checking account
May or may not be interest bearing
Savings account
An account in which money is typically deposited to earn interest
Interest bearing

17. Interest Accounts Earning Bearing Stock Certificate of deposit
Money market account
Savings Bond
Bearing
Credit cards
loans 17

18. Additional Services Which May Be Offered
Safe-deposit box
A secured box in a bank to be used for valuable and important personal items
Financial counseling
Information and advice is given to customers to help make financial decisions 18

19. Bank Critic
Go to your banks website (if you don’t know your bank, look up any bank- Wells Fargo, America First, etc.)
Look at
Checking account
Do you make interest?
Is there a way to make interest?
Do you pay fees?
Savings account
Interest rate?
What could you do to raise the interest rate?
Fees?

20. Cash Management Tools Five types: Checking Account Savings Account
Money Market Deposit Account
Certificate of Deposit
Savings Bond

21. Checking Account Checking Account Features may include:
Tool used to transfer funds deposited into an account to make a cash purchase.
Checking accounts may be non-interest or interest earning.
Features may include:
Minimum balance requirements;
Charge transaction fees;
Limited number of checks written monthly.
Reduces the need to carry large amounts of cash.

22. Savings Account Savings Account
Account to hold money not spent on consumption.
Have a lower interest rate than other cash management tools
May have minimum balances

23. Money Market Deposit Account
A combination savings/investment plan in which money is used to purchase safe, liquid, securities
- EXAMPLES: CD’s, Government Securities
minimum balance requirement
tiered interest rates- amount of interest earned depends on the account balance
For example: a balance of $10, will earn a higher interest rate than a balance of $2,500.

24. Money Market Deposit Account continued
limited to three to six transactions each month
Features of may include:
Minimum amount required to open the account
often $1,000
balance falls below a specified amount
earn a lower interest rate

25. Certificate of Deposit (CD)
A deposit that earns a fixed interest rate for a specific length of time
Interest rates vary depending upon specified time length.
The longer the length, the higher the interest rate.

26. Certificate of Deposit continued
Features may include:
Range from seven days to eight years in length;
Minimum deposits range from $100-$100,000;
If funds are withdrawn before the expiration date, penalties are assessed;
Different types to fit your needs
Standard- fixed
Flexible- can add money and withdraw on occasion free of charge

27. Savings Bonds
A registered, non-transferable bond issued and backed by the U.S. Government
"the All American Investment"
easy way to save money safely
get a good market return
Rates change every May and November based on either current market rates or inflation.

28. Savings Bond
Can buy from bank, through payroll deductions or from Federal Reserve
Two types
I Bond-
state and local income tax exempt
federal income tax can be deferred
If cashes in before five years
subject to a 3-month earnings penalty
earn interest for as long as 30 years

29. Savings Bonds Series EE Savings Bond Government tracks bond by SS#
Earn fixed rate of return
Buy for 50% of face value
Minimum $50 bond- Max $10,000 per year
$50 bond
Buy for $25
When mature you receive $50
20 years to maturity
Government tracks bond by SS#

30. Liquidity
Liquidity
How quickly and easily an asset can be converted into cash.
Investors should:
Invest in both liquid and non-liquid tools.
Liquid assets are important for emergencies when cash must be quickly accessed.
Cash management tools are protected by the U.S. Government against loss.

31. Liquidity Checking Account Most Liquid Savings Account
Money Market Deposit Account
Certificate of Deposit
Savings Bond
Least Liquid

32. Low Risk These five cash management tools are low risk:
Insures the funds so the consumer does not lose money on the investment.
However, they have lower interest rates.
Causes low returns

33. The End