SavingsSavings

Unit 9: Financial, Economic, Unit 9: Financial, Economic, and Business Technologyand Business TechnologyCompetency 3Competency 3: : Demonstrate Demonstrate

skills necessary to create a skills necessary to create a financial planfinancial plan..

SavingSavingFinancial security begins when you Financial security begins when you can start saving. can start saving. – What is financial security?What is financial security?

A point in life when you know that there will A point in life when you know that there will be enough money to pay for a short term be enough money to pay for a short term need.need.

Savings plans enable you to provide Savings plans enable you to provide for future needs, seen and unseen.for future needs, seen and unseen.– What are seen and unseen needs?What are seen and unseen needs?

Why should you save?Why should you save?The best reason to save is to be able to The best reason to save is to be able to handle expected and unexpected handle expected and unexpected needs.needs.

What problems can arise from not What problems can arise from not having any savings set aside?having any savings set aside?– FrustrationFrustration– Financial TroubleFinancial Trouble– BankruptcyBankruptcy

Short Term GoalsShort Term GoalsWhat are short term needs?What are short term needs?– Needs that arise that require a larger amount Needs that arise that require a larger amount

of money than what is allowed by budget.of money than what is allowed by budget.

– You should have short term goals, which is to You should have short term goals, which is to save money for short term needs.save money for short term needs.

Examples:Examples:– Emergencies (Unemployment, sickness, accidents)Emergencies (Unemployment, sickness, accidents)– Vacations Vacations – Social Events (Weddings, family gatherings)Social Events (Weddings, family gatherings)

Long Term GoalsLong Term GoalsWhat are long term goals?What are long term goals?– Planning for major future purchases.Planning for major future purchases.

Examples of Long Term GoalsExamples of Long Term Goals– Home Ownership (down payments)Home Ownership (down payments)– Education (College)Education (College)

A good time to save for education is at a child’s birth.A good time to save for education is at a child’s birth.

– RetirementRetirement– InvestmentInvestment

Investing is risky! Should be done in addition to saving.Investing is risky! Should be done in addition to saving.

How Money GrowsHow Money GrowsPrincipal Principal – The amount of money you deposit.The amount of money you deposit.

Interest Interest – Money that the bank pays you for using your Money that the bank pays you for using your

money.money.

Compound interestCompound interest– Interest is found by multiplying the interest rate by Interest is found by multiplying the interest rate by

the principal, and then interest is added to the the principal, and then interest is added to the principal.principal.

The more often interest is compounded, the greater The more often interest is compounded, the greater your earnings.your earnings.

Where You Can SaveWhere You Can SaveCommercial banks (Bancorp, Regions)Commercial banks (Bancorp, Regions)

Savings BanksSavings Banks

Brokerage FirmsBrokerage Firms

Credit UnionsCredit Unions

Savings AccountsSavings Accounts

Once you have decided to establish a Once you have decided to establish a savings program, you need to know about savings program, you need to know about the different types available.the different types available.

Regular SavingsRegular Savings– High High liquidity liquidity (how easily assets can be (how easily assets can be

turned into cash) because you can withdraw turned into cash) because you can withdraw your money at any time.your money at any time.

– Some banks charge fees when you withdraw Some banks charge fees when you withdraw more times than the maximum for a certain more times than the maximum for a certain time periodtime period

Savings AccountsSavings Accounts

Certificate of Deposit (CD)Certificate of Deposit (CD) – Sum of money deposited for a set length of Sum of money deposited for a set length of

time.time.– Less Less liquidliquid than regular savings. than regular savings.– Interest rates are higher.Interest rates are higher.– You are penalized if you withdraw your money You are penalized if you withdraw your money

early.early.– Maturity DateMaturity Date

The date when you are able to withdraw without The date when you are able to withdraw without being penalized.being penalized.

Savings AccountsSavings AccountsMoney Market FundsMoney Market Funds– Combination savings/investment plan in which Combination savings/investment plan in which

money deposited is used to purchase money deposited is used to purchase securities.securities.

– Interest is compounded daily.Interest is compounded daily.– No fee for withdrawals.No fee for withdrawals.

Money Market AccountsMoney Market Accounts– Similar to fundsSimilar to funds– Minimum balance of usually $500Minimum balance of usually $500– May be a restriction on number of checks to May be a restriction on number of checks to

writewrite

Selecting a Savings PlanSelecting a Savings Plan

Consider these things when selecting a Consider these things when selecting a Savings Plan:Savings Plan:– LiquidityLiquidity – How quickly it turns to cash. – How quickly it turns to cash.– SafetySafety – You want your money safe from loss. – You want your money safe from loss.– ConvenienceConvenience – Availability to your money. – Availability to your money.– Interest Earning Potential (Interest Earning Potential (yieldyield) – You want ) – You want

your money to make your money to make more money!more money!– Early Withdrawal penaltiesEarly Withdrawal penalties

Saving RegularlySaving Regularly

You should have a savings goal.You should have a savings goal.– Your money will only grow if you spend less Your money will only grow if you spend less

than you take in.than you take in.– You must save regularly, you must have the You must save regularly, you must have the

will to save money!will to save money!– Savings Clubs Savings Clubs

You agree to deposit money and not touch it for a You agree to deposit money and not touch it for a certain amount of time, e. i., Christmas Clubcertain amount of time, e. i., Christmas Club

– Automatic Payroll DeductionAutomatic Payroll DeductionHaving a certain amount withheld from your Having a certain amount withheld from your paycheck and deposited into savings.paycheck and deposited into savings.