Choose to Save
Advanced Level
2.4.1.G1
What is Saving?
Saving –
accumulation of excess Results
funds by intentionally
in
spending less than you
earn
Savings –
portion of income not
spent on consumption
(purchase of goods and
services)
© 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
2.4.1.G1
Why Save?
Your present self impacts your future self
By saving money today you will have financial security in the future
Emergency
savings
•Cash set aside
to cover the cost
of unexpected
events
Short-term goals
& expenses
Financial security
• Pay for items
that aren’t part
of a typical
spending plan
• Lower stress
• Lower negative
emotions
What are examples of emergency expenses?
© 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
Saving Reduces Financial Risk and
Uncertainty
Savings is a monetary asset
Contributes to net worth
Very liquid (can quickly and
easily be converted into cash)
What monetary assets do you
have for emergencies?
© 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
2.4.1.G1
How Much Money Should
Be Saved?
2.4.1.G1
At least six months worth of
expenses in emergency savings
$2,000
monthly
expenses
6 months
$12,000
Depends on…
Income
Dependents
Job
security
Insurance
coverage
© 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
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
© 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
2.4.1.G1
My Saving Quest
2.4.1.G1
Part 1: My Wish List
Brainstorm a personal wish list for yourself
$
My
Wish
List
$
Approximately how much
does each item cost?
$
Place a star next to the item you
would like to start saving for today
© 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
2.4.1.G1
Identifying Money to Save
Examine
current
spending
What changes
can you make to
reduce current
spending?
Consider
small, often
daily,
expenses
Consider
large, often
monthly,
expenses
Ask yourself if
items are a
need or a
want
What are ways to
reduce spending?
© 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
2.4.1.G1
Identifying Money to Save
Do It Yourself
Increase
Income
Instead of paying someone
Trade-off
Decrease
Expenses
Investing time and skills
What can you do yourself to save money?
© 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
2.4.1.G1
Create a Savings Plan
What are
you saving
for?
When will
the goal
be
reached?
Set a
goal!
Is the goal
realistic?
How much
needs to
be saved?
How can
the goal
be
achieved?
© 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
2.4.1.G1
Make Sure Your Goal is Realistic!
Saving
money for
future
Giving up
the
purchase of
something
in the
present
Ensure the
trade-offs are
realistic and
opportunity cost
of what is given
up to save is not
too high!
Why can saving be difficult?
© 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
2.4.1.G1
My Saving Quest
Part 2: My Current Spending
Identify three changes you will make to your current income
or spending today to start saving for the future
• Trade-off
• Trade-off
• Trade-off
What is the trade-off for each change?
Place a star  next to items with a realistic opportunity cost
© 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
2.4.1.G1
Pay Yourself First
Your present self impacts you future self!
Save a
predetermined
amount of
money
Do so each
time you are
paid
Do so before
using money
for spending
Make it
automatic!
© 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
Saved Money Provides For Your
Future Self….
… and can increase in value!
Time Value of Money money available at the
present time (today) is
worth more than the
same amount if received
in the future
Time
Money
Interest
Rate
© 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
2.4.1.G1
2.4.1.G1
What is Interest?
Interest –
the price of
money
Interest rate –
percentage
rate used to
calculate
interest
Interest may
be earned or
paid
Compounding
interest –
earning
interest on
interest
When you don’t
withdraw interest
earned from an
account the
interest earns
additional interest
Depository
institutions
offer secure
accounts to
save money
© 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
2.4.1.G1
How Do Interest Rates Affect The
Time Value of Money?
More Money
Earned
Interest
Rate
$1,000 Saved for 5 Years with Compounding Interest
$1,051.01
$1,159.27
$1,276.28
1%
3%
5%
© 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
2.4.1.G1
How Does Time Affect the Time
Value of Money?
Time
More Money
Earned
College Savings Fund
Felix and his parents
Saved for: 18 years
Savannah and her parents
Saved for: 4 years
• Started when he was born
• Started when she was a freshman
Contributed: $50/month
Total Contribution: $10,800
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
© 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
2.4.1.G1
How Does Money Affect the Time Value
of Money?
More Money
Earned
Money
3% interest for 5 years
Principal original amount
of money saved
or invested
Principal
Value of Savings
$100
$115.93
$1,000
$1,159.27
$10,000
$11,592.74
© 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
2.4.1.G1
Time Value of Money Magic!
50
45
40
35
Years
30
25
20
15
10
5
1
Year 20
Year
15
Interest
Earned:$100.00
$111.07at
Initial Investment
(Principal):
Year
10 interest
Interest
Earned:
$79.19 is Worth: $386.97
Amount
Investment
7% compounding
Year
5 Earned:
Interest
Amount
Investment
$56.46 is Worth: $275.90
YearInterest
1Amount
Earned:
Investment
$33.26 is Worth: $196.72
Interest
Earned:
$7.00 is Worth: $140.26
Amount
Investment
Amount Investment is Worth: 107.00
Year 50
Interest Earned: $845.46
Amount Investment is Worth: $2945.70
0
$0.00
$1,000.00
$2,000.00
Dollar Value
© 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
$3,000.00
2.4.1.G1
Maximize Your Return!
Save for as long
as possible!
Save as much as
possible, as often
as possible!
Time
Money
Interest
Rate
Save at the highest interest
rate possible!
© 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
2.4.1.G1
My Saving Quest
Part 3: Implementing My Saving Quest
How much can you realistically save each week?
Write a goal
Specific
Measurable
Attainable
Realistic
Time-bound
How will you make the saving process automatic?
How can your goal be reached
using the time value of money?
© 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
Savings is an Essential Component of a
Financial Plan
Reduces future
financial
uncertainty
Reduces
negative
emotions
Best
accomplished
when
automatic
2.4.1.G1
Requires
trade-offs be
made
Opportunity
for savings to
increase in
value
© 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