Choose to Save

Advanced Level
 2.4.1.G1

What is Saving?

Saving – Savings –
accumulation of Results portion of income not
excess funds by spent on consumption
intentionally spending in (purchase of goods and
less than you earn 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 Short-term goals

Financial security
savings & expenses
•Cash set aside to • Pay for items • Lower stress
cover the cost of that aren’t part • Lower negative
unexpected of a typical emotions
events spending plan

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
2.4.1.G1

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
How Much Money Should
2.4.1.G1

Be Saved?
At least six months worth of
expenses in emergency savings
$2,000
monthly 6 months $12,000
expenses
Depends on…

Dependents

© 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
2.4.1.G1

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
My Saving Quest
2.4.1.G1

Part 1: My Wish List

Brainstorm a personal wish list for yourself

$ $

Approximately how much Place a star next to the item you

does each item cost? 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

What changes Ask yourself if

Examine
can you make to items are a
current reduce current need or a
spending spending? want

Consider Consider
small, often large, often
What are ways to
daily, monthly, reduce spending?
expenses expenses

© 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 Instead of paying someone

Income
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
How much
the goal
be
reached? Set a needs to
be saved?

goal!
How can
Is the goal the goal
realistic? 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 Giving up Ensure the

money for the trade-offs are
future purchase of realistic and
something
in the opportunity cost
present 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
Do so each
predetermined
time you are
amount of
paid
money

Do so before
Make it
using money automatic!
for spending

© 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
 2.4.1.G1

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 Money
in the future 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

What is Interest?

Interest rate –
Interest – percentage Interest may
the price of rate used to be earned or
money calculate paid
interest

When you don’t

Compounding withdraw Depository
interest – interest earned institutions
earning from an account offer secure
interest on the interest earns accounts to
interest additional save money
interest
© 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?

Interest More Money

Rate Earned

$1,000 Saved for 5 Years with Compounding Interest

$1,159.27 $1,276.28
$1,051.01

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?

More Money
Time
Earned

College Savings Fund

Felix and his parents Savannah and her parents
Saved for: 18 years Saved for: 4 years
• Started when he was born • Started when she was a freshman
Contributed: $50/month Contributed: $350/month
Total Contribution: $10,800 Total Contribution: $16,800
Both earned the same interest rate
Both currently have the same balance (about $19,500)
© Take Charge Today – August 2013– Choose to Save– Slide 17

Savannah’s parents contributed significantly more

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
Money
Earned

3% interest for 5 years

Principal - Principal Value of Savings
original amount $100 $115.93
of money saved $1,000 $1,159.27
or invested
$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 Year 20
40 Year
Initial Investment
15
Interest Earned:$100.00
(Principal): $111.07at
35 Year
7% compounding
10 interest
Interest
AmountEarned: $79.19 is Worth: $386.97
Investment
30 Year 5 Earned:
Interest
Amount Investment
$56.46 is Worth: $275.90
25
YearInterest
1AmountEarned:
Investment
$33.26 is Worth: $196.72
Years

20 Interest Earned:
Amount $7.00 is Worth: $140.26
Investment
15 Amount Investment is Worth: 107.00
10 Year 50
5 Interest Earned: $845.46
1 Amount Investment is Worth: $2945.70
0

$0.00 $1,000.00 $2,000.00 $3,000.00

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
 2.4.1.G1

Maximize Your Return!

Save for as long
as possible!

Save as much as
possible, as often
as possible!

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
2.4.1.G1

Financial Plan

Reduces future Reduces Requires

financial negative trade-offs be
uncertainty emotions made

Best Opportunity
accomplished for savings to
when increase in
automatic 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