Saving and Investing Andrea Olson Reward Yourself By Saving • “Be in control of your money, don’t have your money control you!” – Have a goal. • What are you saving for? Be specific. College, trip, etc. – How much should I be putting away? • You should have six to nine months of income in your savings account. Compounding Interest • When interest is added to the principal, so that, from that moment on, the interest that has been added also earns interest. • The higher the APY, the more interest you receive Interest Formula • • • • M is the final amount including the principal P is the principal amount i is the rate of interest per year n is the number of years invested Interest Formula • What is the final amount of money you’ll have if you invest… – $1,000 – For 3 years – With a 5% compound interest rate – M=$1,000(1+.05)^3 – M=??? Shoe Saver vs. Super Saver • Shoe saver puts away five dollars per day per year in a shoebox under their bed • Super saver puts away five dollars per day per year. With 5% interest, compounded daily • How much more money do you think the Super Saver has made after 30 years as compared to the Shoe box saver? Handsonbanking.org Shoe Saver vs. Super Saver Adapted by Legacy Program from Handsongbanking.org • Choice Financial Tips For Saving Money • Prioritize your spending • Make it an automatic habit • Set aside “extra” money into savings • Pay your bills on time • Save for retirement • To save $1200 a year…it is… • $100 a month • $23.80 a week • Or just $3.29 a day! Investing • “Let your money work for you!” • The key to successful investing is buying when the price is low, and selling when the price is high. • Investing involves risk, saving does NOT. • If you cannot afford to lose a certain amount of money, do not invest it. Types of Investments • Low Risk Investments – Ex: Certificate of Deposit • Bonds – Low risk • Stocks – High risk • Shares – www.Finance.yahoo.com • Mutual Funds • Stocks make no promises; bonds are guaranteed Rule of 72 72 Interest Rate= Years it will take to double your investment Rule of 72 • Interest rate:8% 72 8 = ?? Diversify! “A year from now, you may wish you had started today” -Karen Lamb Works Cited • “Hands on Banking: Money Skills You Need for Life.” April 2012. <handsonbanking.org> • Quinn, J.B. Making the Most of Your Money Now. Simon & Schuster, 2009. • Schickler, Scott. Conference Call Interview. 9 May 2012. • Chokkavelu, Anand. “The 100 Things I’ve Learned in Investing.” The Motley Fool. 16 Sept. 2012. Web. 29 June 2012. http://www.fool.com/investing/general/2012/06/29/t he-100-things-ive-learned-in-investing.aspx • Buffet, Warren. Finance & Accounting. University of Virginia: Darden Business Publishing, 2005.