1. The Secrets of Saving

2. Do you know what will happen tomorrow?
What is Savings?
Savings - portion of income not spent on current expenses
Do you know what will happen tomorrow?
Because the future is unpredictable
Money should be saved to pay for unexpected events or emergencies

3. Why is it important to save money?
1. Without savings, unexpected events can become large financial burdens
2. Helps people become financially secure
If an unexpected expense occurs, money cannot be found in a scavenger hunt!

4. What are other reasons a person would want to save money?
Buy items that are too expensive to be purchased with monthly income
Vacation
Car
Furniture
What item would you like to save money to purchase?

5. How much money should a person save?
To be considered financially secure and have enough money for emergencies
Recommended Amount
Example
At least six months worth of expenses
A household that has $2,000 per month of expenses
Should have at least $12,000 in savings
$2,000 x 6 months
Why would this amount of savings be recommended?

6. How can this amount of savings be reached?
Recommended-
10-20% of net income saved until appropriate amount of savings is reached
Net income –
(take home pay)
Income after taxes have been taken out of a paycheck

7. Where can money be saved?
Piggy Bank
Coffee Can
Depository Institution
Under a Mattress
Jar
Which is the safest method?
Depository Institution!

8. What is a depository institution?
Depository institution - business that offers financial services to people
What is a name of a depository institution in your community?
Advantages to Saving Money
at a Depository Institution
Money is insured from loss
Offer accounts that earn interest

9. What is Interest? Interest - price of money
Depository institution accounts may earn money from interest
Interest earned-
calculate a percent of total amount of money in account
This percent is the interest rate

10. What accounts at depository institutions earn interest?
Savings Account
Money Market Deposit Account
Certificate of Deposit
Definition
Characteristics
Holds money not spent on current expenses
Pays a higher interest rate than a savings account
Pays interest on a lump sum of money
Money stored until needed
Interest earning
Minimum deposit often required
Number of monthly withdrawals often limited
Specific time requirements
When time period is complete, money and interest earned can be withdrawn
Higher interest rates for longer time periods

11. Value of money saved in these accounts increases!
Time Value of Money
Value of money saved in these accounts increases!
Time value of money- money paid in future is not equal to money paid today

12. Factors affecting the Time Value of Money
Save for as long as possible!
Amount of Money
Save as much as possible, as often as possible!
Interest
Rate
Save at the highest interest rate possible!

13. Use the time value of money to your advantage!
$500 saved at 3% interest
Year
Amount of money
account is worth
Initial amount saved
$500.00 1
$515.00 2
$530.45 3
$546.36 4
$562.75 5
$579.64
Use the time value of money to your advantage!

14. Time Value of Money Magic!
Year 10
Interest Earned: $56.46
Amount Savings is Worth:$196.72
Initial Savings: $ at 7% interest
Year 1
Interest Earned: $7.00 Amount Savings is Worth:
Year 15
Interest Earned: $79.18
Amount Savings is Worth: $275.90
Year 20
Interest Earned: $111.07
Amount Savings is Worth: $386.97
Year 5
Interest Earned: $33.26
Amount Savings is Worth: $140.26
Year 50
Interest Earned: $845.46
Amount Savings is Worth: $

15. How do you choose to save money over spend money?
Pay Yourself First!
A Strategy
Set aside money for saving before spending any money
Save then spend!
Creates a habit
Saving is not what is left at end of month
Why?

16. To successfully practice “pay yourself first”…
Set goals!
Goal-
End result of something a person intends to accomplish
Financial Goal-
Specific objectives to be accomplished through financial planning

17. Why is it important to set financial goals?
Helps identify and focus on items that are most important
Make decisions that help obtain what is most important
Such as choosing to save over spend!

18. What is a trade-off to saving money for the future?
What are you willing to give up to obtain the item you want to purchase?
This is a trade-off! Trade-off - giving up one thing for another Every decision you make involves a trade-off!
What is a trade-off to saving money for the future?
Being more financially secure in the future by saving money is a trade-off to spending money in the present

19. You identified trade-offs that you would make to obtain the item you want to purchase. Do any of those trade-offs affect your spending?
When considering trade-offs to financial goals Examine spending Adjust spending to reach financial goals

20. Why is it important to examine trade-offs and spending when setting financial goals?
Knowing what is given up to receive benefits from goals
Makes goals easier to accomplish!

21. Is there a secret to saving money?
Choose saving money for the future over spending money in the present

22. In order to choose saving money over spending money…
“Pay Yourself First”
To successfully practice this strategy…
Set financial goals
Examine trade-offs
Examine current spending

23. What are the “secrets” to saving money?
Because of the unknown of the future, save money to pay for unexpected events or emergencies
To be considered financially secure, save at least six months worth of expenses
To reach this amount, save 10-20% of net income
Money saved at a depository institution is protected against loss and can earn interest

24. What are the “secrets” to saving money?
Take advantage of the time value of money
Save as much as possible, for as long as possible, at the highest interest rate possible!
Saving money is accomplished by practicing “pay yourself first” and setting goals
Savings goals become more attainable when trade-offs and spending plans are examined