1. “Take Charge of Your Finances” Advanced Level
Choosing to Save
“Take Charge of Your Finances” Advanced Level

2. My Wish List My Wish List Brainstorm a personal wish
list for yourself.
My Wish List
Include anything of monetary value

3. “Today’s self has an impact on future self”
What does this statement mean to you?
“Today’s self has an impact on future self”

4. What is the difference between saving and investing?
Purchase of assets with the goal of increasing future income
Portion of current income not spent on consumption
Used to pay for:
Used to pay for:
Emergencies
Large Purchases
Higher Education
Retirement

5. What is an Asset?
Assets- everything an individual owns with monetary value
Examples of Assets
Cash
Clothing
Houses
Electronics
Savings Accounts
Automobiles
Furniture
Make a list of your assets

6. Liquidity- how quickly and easily an asset can be converted to cash
What is Liquidity?
Liquidity- how quickly and easily an asset can be converted to cash
Less Liquid
Savings Tools
More Liquid
Investments

7. Liquid Assets Savings Tools Liquid Accessible in emergencies Assets
Would any of your assets provide cash
to fund an emergency?

8. Why are saving and investing important?
Serve different purposes but both are essential
Saving
Investing
Provides the foundation for financial security
Enhances and helps build wealth

9. What is wealth and how is it measured?
Wealth - measurement of how much a person owns once all debts have been paid
Net worth statement - describes a person’s overall financial condition on a specified date
Assets
Liabilities
Net Worth (wealth)

10. Juanita’s Net Worth Statement Alexis’ Net Worth Statement
Who is Wealthier?
Juanita - earns $35,000 per year
Alexis – earns $100,000 per year
Juanita’s Net Worth Statement
Assets
Home
$60,000
Retirement
$24,000
Automobile
$8,000
Total Assets
$92,000
Liabilities
College loan
$6,000
Mortgage
$35,000
Total Liabilities
$41,000
Net Worth
$51,000
Alexis’ Net Worth Statement
Assets
Home
$75,000
Retirement
$35,000
Automobile
$8,000
Total Assets
$118,000
Liabilities
College loan
$10,000
Automobile loan
$4,000
Credit card debt
$20,000
Mortgage
$65,000
Total Liabilities
$99,000
Net Worth
$19,000

11. The Choices You Make Today Impact Your Future!
Saving and investing…
Increase Assets
Decrease
Liabilities
Changed the font the old one (rage italic) was too hard to read
Increased Wealth!
Why is it important to increase wealth?

12. Why are saving and investing important?
Help pay for a level of living and
reach a desired standard of living
Level of Living
Standard of Living
Money needed to pay for the necessities and comforts currently enjoyed
Higher level of living that person wishes to reach
PRESENT
FUTURE

13. How much money should be saved and invested?
SAVINGS
Recommended Amount
Example
How
At least six months worth of expenses in liquid assets
Household with $2,000 per month of expenses = at least $12,000 in savings
($2,000 x 6 months)
Save 10-20% of net income every month until appropriate amount of savings is reached

14. How much money should be saved and invested?
INVESTING
Make sure an appropriate amount of savings is accessible
Redirect goals from saving to investing
Continue to invest 10-20% of net income every month

15. Saving vs. Investing Activity- Does the characteristic describe saving or investing?
Builds Wealth
Saving or Investing:
Investing

16. Saving vs. Investing Activity
Characteristic:
Used to pay for emergencies
Saving or Investing:
Saving

17. Saving vs. Investing Activity
Characteristic:
Provides the Foundation for Financial Security
Saving or Investing:
Saving

18. Saving vs. Investing Activity
Characteristic:
Less Liquid
Saving or Investing:
Investing

19. True or False? Identify if each statement is true or false…□
If Janie makes a one time investment of $500 at age 20 in a tool that earns the historic 12% average, by age 60 the $500 will become $46,525.
If Samuel invests $3,000 annually from ages (a total of $30,000 invested) in a tool earning 10% interest, he will have $1.2 million dollars by age 65.
They are both true. The time value of money makes this possible!

20. What is the Time Value of Money?
Money paid out or received in the future is not equivalent to money paid out or received today
Interest Rate
Money
Time
Factors that make the time value of money possible:

21. What is Interest? Interest - the price of money
Interest rate - percentage rate paid on money saved
Compounding interest – earning interest on interest

22. How Do Interest Rates Affect Time Value of Money?
Larger Return
Return- profit generated by saving and investing
$1,000 invested for 5 years
Interest Rate (compounding)
Amount Investment is Worth 1%
$1,051.01 3%
$1,159.27 5%
$1,276.28 7%
$1,402.55 9%
$1,538.62

23. How Does Time Affect the Time Value of Money?
Larger Return
Time
Interest Rate
Money
Time

24. Ed waits until he is 28 and contributes $3,000 at 10% for 37 years
A Little Goes a Long Way
Sally puts away $3,000 per year for 10 years, at age 22. She earns 10% on her investment
Sally invests a total of $30,000 and has earned $1,205,063 by the age of 65
Ed invests a total of $111,000 and accumulates $1,079,856 by the age of 65
Ed waits until he is 28 and contributes $3,000 at 10% for 37 years

25. How Does Money Affect the Time Value of Money?
Larger Return
Money
Interest Rate
Money
Time
Principal - original amount of money saved or invested

26. Amount of Principal Investment
Amount of Money
7% interest compounded
annually for 5 years
Amount of Principal Investment
Return
$100.00
$40.26
$1,000.00
$402.55
$10,000.00
$4,025.52

27. Time Value of Money Magic!
Year 20
Interest Earned: $111.07
Amount Investment is Worth: $386.97
Year 15
Interest Earned: $79.19
Amount Investment is Worth: $275.90
Initial Investment (Principal): $ at 7% compounding interest
Year 1
Interest Earned: $7.00
Amount Investment is Worth:
Year 10
Interest Earned: $56.46
Amount Investment is Worth: $196.72
Year 5
Interest Earned: $33.26
Amount Investment is Worth: $140.26
Year 50
Interest Earned: $845.46
Amount Investment is Worth: $

28. Maximize Your Return! Time Money Interest Rate
Invest for as long as possible!
Invest as much as possible, as often as possible!
Invest at the highest interest rate possible!

29. How do I begin to save money?
Follow this process…
Consider what savings goals you want to reach
Evaluate the consequences of that goal:
What trade-offs will you have to make?
What is the opportunity cost of those trade-offs?
How will the trade-offs made affect your spending plan?
Write a SMART goal
Make saving automatic
Let’s learn the details of this process…

30. What savings goals do you want to reach?
Consider what savings goals you want to reach
Refer to your wish list.
These items represent savings goals!
Goal - the end result of something a person intends to accomplish
Goal setting helps you think about your future self

31. Evaluate the consequences of that goal
Consequences of Goals
Consider what savings goals you want to reach
Evaluate the consequences of that goal
Do you currently have enough money to acquire all of the items on your wish list?
If not, what are you willing to give up in order to acquire one of these items?
That is known as a trade-off!

32. Consequences of Goals- What is a Trade-off?
Giving up one thing for another
Every decision inevitably involves a trade-off
What is the value of this
trade-off to you?
That is known as opportunity cost!

33. Consequences of Goals- What is Opportunity Cost?
Opportunity cost - value of the next best alternative that must be forgone when a trade-off is made
Allows you to analyze the consequences of choices to decide which trade-offs to make

34. Consequences of Goals- Spending Plans
To reach your savings goal you identified trade-offs that would be made. How will these trade-offs affect your spending plan?
Spending plan - document used to record both planned and actual income and expenses over a period of time
Adjust your spending plan accordingly
Income OR
Expenses

35. Set SMART Goals
Consider what savings goals you want to reach
Evaluate the consequences of that goal
Write a SMART goal
Write a SMART goal for one of the items on your wish list.
My Wish List

36. Make Saving and Investing Automatic
Consider what savings goals you want to reach
Evaluate the consequences of that goal
Write a SMART goal
Make saving automatic
Make your goal happen automatically
Pay yourself first - saving strategy that means to set aside a predetermined portion of money for saving before any money is used for spending
Save then spend!

37. How can saving and investing become automatic?
Automatic Transfers
Most depository institutions allow automatic transfers between accounts
Designated amount of money will be automatically moved into a saving or investing tool every month

38. How can saving and investing become automatic?
Payroll Deduction
Offered by most employers
Employees designate money from their paycheck be deposited into an account of their choice

39. Summary- What is the purpose of saving and investing money and why is it important?
Financial security and a positive level of living
Saving
Wealth accumulation
and a desired
standard of living
Investing
Think about your future self!

40. To practice smart saving and investing habits …
Save 10-20% of net income in liquid assets until it equals at least 6 months of expenses Continue to invest 10-20% of income to increase wealth Utilize the time value of money to your greatest advantage

41. Choose to Save! Follow this process…
Consider what savings goals you want to reach
Evaluate the consequences of that goal:
What trade-offs will you have to make?
What is the opportunity cost of those trade-offs?
How will the trade-offs made affect your spending plan?
Write a SMART goal
Make saving automatic