Choose to Save
Advanced Level
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 2Funded 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
What is Saving?
Results in
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 3Funded 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
Why Save?
Your present self impacts your future selfBy saving money today you will have financial security in the future
What are examples of emergency expenses?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 4Funded 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
Very liquid (can quickly and easily be converted into cash)
Savings is a monetary assetContributes to net worth
What monetary assets do you have for emergencies?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 5Funded 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
How Much Money Should Be Saved?
At least six months worth of expenses in emergency savings
Depends on…
Dependents
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 6Funded 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 anIncome & 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
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 7Funded 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
My Saving QuestPart 1: My Wish List
$
$ $
Brainstorm a personal wish list for yourself
Approximately how much does each item cost?
Place a star next to the item you would like to start saving for today
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 8Funded 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
Identifying Money to Save
What are ways to reduce spending?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 9Funded 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
Identifying Money to Save
Do It Yourself
What can you do yourself to save money?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 10Funded 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
Create a Savings Plan
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 11Funded 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
Make Sure Your Goal is Realistic!
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?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 12Funded 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
My Saving QuestPart 2: My Current Spending
Identify three changes you will make to your current income or spending today to start saving for the future
What is the trade-off for each change?
Place a star next to items with a realistic opportunity cost
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 13Funded 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
Pay Yourself First
Your present self impacts you future self!
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 14Funded 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….
Time Value of Money - money available at the present time (today) is worth more than the
same amount if received in the future
… and can increase in value!
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 15Funded 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
What is Interest?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 16Funded 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
How Do Interest Rates Affect TheTime Value of Money?
Interest Rate
More Money Earned
1% 3% 5%
$1,051.01 $1,159.27 $1,276.28
$1,000 Saved for 5 Years with Compounding Interest
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 17Funded 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
TimeMore Money
Earned
How Does Time Affect the Time Value of Money?
Felix and his parentsSaved for: 18 years • Started when he was bornContributed: $50/monthTotal Contribution: $10,800
Savannah and her parentsSaved for: 4 years• Started when she was a freshmanContributed: $350/monthTotal Contribution: $16,800
Both earned the same interest rateBoth currently have the same balance (about $19,500)
Savannah’s parents contributed significantly more
College Savings Fund
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 18Funded 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
How Does Money Affect the Time Value of Money?
Principal - original amount of money saved
or invested
MoneyMore Money
Earned
3% interest for 5 years
Principal Value of Savings
$100 $115.93
$1,000 $1,159.27
$10,000 $11,592.74
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 19Funded 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
0
1
5
10
15
20
25
30
35
40
45
50
$0.00 $1,000.00 $2,000.00 $3,000.00
Dollar Value
Year
s
Year 5Interest Earned: $33.26Amount Investment is Worth: $140.26
Year 10Interest Earned: $56.46Amount Investment is Worth: $196.72
Year 15Interest Earned: $79.19Amount Investment is Worth: $275.90
Year 20Interest Earned: $111.07Amount Investment is Worth: $386.97
Year 50Interest Earned: $845.46Amount Investment is Worth: $2945.70
Time Value of Money Magic!
Initial Investment (Principal): $100.00 at 7% compounding interest
Year 1Interest Earned: $7.00Amount Investment is Worth: 107.00
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 20Funded 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
Maximize Your Return!Save for as long
as possible!
Save as much as possible, as often
as possible!
Save at the highest interest rate possible!
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 21Funded 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
My Saving QuestPart 3: Implementing My Saving Quest
How will you make the saving process automatic?
How much can you realistically save each week?
How can your goal be reached using the time value of money?
2.4.1.G1
© Take Charge Today – August 2013– Choose to Save– Slide 22Funded 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