Chapter 24
BUDGETING, SAVING,
AND INVESTING MONEY
24.1 Budgeting Money
24.2 Saving Money
24.3 Investing Money
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Lesson 24.1
BUDGETING MONEY
Objectives
 Identify your own personal
income and spending patterns
 Name and describe the four
steps involved in developing
and using a budget
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Lesson 24.1
INCOME AND
SPENDING PATTERNS
 Income is money coming in.
 An expenditure is money that is spent.
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Lesson 24.1
RECORD OF
INCOME AND
EXPENDITURES
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Lesson 24.1
DEVELOPING AND
USING A BUDGET
 A budget is a plan for managing
income and expenditures.
 Four steps in developing a budget
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Establishing goals
Estimating income and expenditures
Setting up the budget
Following and revising the budget
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Lesson 24.1
ESTABLISHING GOALS
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Identify what you need and want
All family members should participate
Be realistic
Be specific
Include short-range, medium-range,
and long-range goals
 Make a list
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GOALS WORKSHEET
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Lesson 24.1
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Lesson 24.1
ESTIMATING INCOME
AND EXPENDITURES
 Choose a budget period
 Keep track for at least four weeks
 Figure out average income per budget
period
 Figure out average expenditures per
budget period
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Lesson 24.1
SETTING UP THE BUDGET
 Savings is cash set aside in a bank account
to be used for financial emergencies and
goals
 Regular expenditures, sometimes called
fixed expenditures, are those essential
monthly payments that are usually the same
amount each month.
 Variable expenditures are day-to-day living
expenses.
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Lesson 24.1
EXAMPLES OF
REGULAR EXPENDITURES
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Rent or mortgage payment
Utilities
Insurance
Auto payment
Credit or loan payments
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Lesson 24.1
EXAMPLES OF
VARIABLE EXPENDITURES
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Food and beverage
Clothing
Transportation
Household
 Medical care
 Entertainment
 Gifts and
contributions
 Taxes
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Lesson 24.1
HOUSEHOLD
BUDGET
FORM
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Lesson 24.1
FOLLOWING AND
REVISING THE BUDGET
 Following a budget involves
 Allocation, or distribution, of income to
the various items on the budget
 Keeping accurate records of expenditures
 A line item is a single entry, or
budgeted item.
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Lesson 24.2
SAVING MONEY
Objectives
 Discuss the importance of setting
aside a portion of income for
savings
 Name and describe the two basic
types of savings accounts
 Compute interest rate returns on
savings
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Lesson 24.2
WHY SAVE?
 Saving will ensure that you have funds
available to meet a financial
emergency.
 Saving will allow you to achieve
financial goals.
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Lesson 24.2
TYPES OF SAVINGS ACCOUNTS
 Regular savings accounts
 Also called passbook accounts
 Offer safety, convenience and liquidity
 Liquidity refers to an asset that can be easily
converted into cash.
 Time deposits
 A certificate of deposit (CD) is money that is
deposited into an interest-bearing account for a
predetermined length of time and rate of return.
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SAVINGS DEPOSIT FORM
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Lesson 24.1
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SAVINGS WITHDRAWAL FORM
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Lesson 24.2
FIGURING INTEREST RATES
 Annual interest rate
 Frequency of interest compounding
 Compounding is a process in which an
institution adds interest to an account, the
balance rises, and the account continues to earn
more interest based on the higher balance.
 Interest pay periods
 Annual percentage yield
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INTEREST RATES
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Lesson 24.1
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COMPOUNDING INTEREST
Lesson 24.1
More frequent interest compounding
results in higher returns.
More frequent interest
compounding results in higher
Annual Percentage Yield (APY).
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SAVINGS GROWTH
Lesson 24.1
Based on 5.25 percent
interest, compounded daily
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EFFECT OF INTEREST RATES
ON SAVINGS GROWTH
Lesson 24.1
Based on a $50 a month
deposit, compounded daily
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Lesson 24.3
INVESTING MONEY
Objectives
 Discuss advantages and
disadvantages of investing
 Explain the following types
of investments: stocks,
bonds, and money market
funds
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Lesson 24.3
WHY INVEST?
 Investing is the process of using money not
required for personal and family needs to
increase overall financial worth.
 Investing is different from saving.
 There is potential for making a lot of money.
 There are risks of losing money.
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Lesson 24.3
TYPES OF INVESTMENTS
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Stocks
Mutual funds
Bonds
Money market funds
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Lesson 24.3
STOCKS
 Shares of ownership in a company are called stock.
 Brokers are individuals or companies that
specialize in selling stocks and other financial
investments.
 A commission is a fee paid to a broker for
purchasing stock for you.
 Dividends are profits that a company divides among
its shareholders.
 Capital gain refers to an increase in the value of
stock or another asset.
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Lesson 24.3
MUTUAL FUNDS
 A mutual fund is an investment company
that pools the money of thousands of
investors and buys a collection of
investments that may include stocks, bonds,
and other financial assets.
 Advantages of mutual funds
 Diversification
 Professional management
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Lesson 24.3
BONDS
 A bond represents a loan to a
company or government agency.
 Types of bonds
 Corporate bonds
 Government bonds
 Municipal bonds
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Lesson 24.3
MONEY MARKET FUNDS
 A money market fund is a type of
mutual fund that invests in short-term,
high-liquidity investments.
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Lesson 24.3
INVESTMENT PLANNING
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Decide on goals and stick to them
Do not get greedy
Stay away from hot tips
Educate yourself about investing
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