Transcript Introduction to Saving 1.14.1.G1 Saving Basics Savings is the portion of current income not spent on consumption.  Savings accounts provide an easily accessible place.

Introduction to
Saving
1.14.1.G1
Saving Basics
Savings is the portion of current income not spent on
consumption.
 Savings accounts provide an easily accessible place for
people to store their money to meet daily living expenses
and to have money for emergencies.
 Financial experts recommend individuals keep a
minimum of three to six months of salary in a savings
account.
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© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Savings Account Uses
Daily Expenses
 Emergencies
 Future Purchases
 Future Investing
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© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Saving vs. Investing
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Saving
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The portion of current income not spent on consumption.
Place to store money for daily expenses and for emergencies.
Liquidity is how quickly and easily an asset can be converted into
cash. In an emergency, cash needs to be easily accessible. Savings
accounts are more liquid than investment accounts.
Generally yield a low interest rate, often barely meeting
inflation.
© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Saving vs. Investing cont.
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Investing
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The purchase of assets with the goal of increasing future income.
Develop and implement a savings plan before beginning an
investment.
Investments are not liquid as savings.
Rate of return, or annual return on the investment, varies, but is
usually higher.
© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Reasons People Should Save
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Emergencies – It is recommended individuals have a minimum of
three to six months of salary in savings accounts for emergencies.
Examples of emergencies can include illness, losing a job, or
immediate need to replace a large item such as a washing machine.
Expenses – Savings accounts can be used as a budgeting tool to
manage monthly expenses.
Future Purchases – Money can be used to meet future goals such as a
college education, new car, down payment on a home, or a new
stereo.
Investing – After an individual has established a savings account,
money should be invested monthly for future income.
© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Why People Don’t Save
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People are not having their current consumption needs and wants
met.
People do not know how much they need to be saving or investing for
future goals.
Money in savings accounts earns such poor interest rates. It barely
(if at all) keeps up with inflation. Investing usually gains higher
interest rates.
Individuals justify not needing money for emergencies because they
have credit easily available.
People feel they have adequate insurance and job security; therefore
they do not need money for emergencies.
© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Developing a Savings Plan
Track spending for one month to determine where money
is currently going.
 Evaluate spending and determine where money can be
saved.
 Decide what amount will be put into savings per month,
put decision into writing and stick to it!—Now you have a
Savings Plan.
 Be willing to make adjustments. If the savings plan is not
working evaluate why.
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© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
“Pay Yourself First”
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Put money away into a savings account or investment
BEFORE you pay other bills or use for spending.
© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
70-20-10 Rule
Spend 70% of money you earn
 Save 20% of money you earn
 Invest 10% of money you earn
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© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.14.1.G1
Conclusion
Savings accounts provide an easily accessible place for
people to store their money.
 Savings accounts can be used for daily expenses,
emergencies, future purchases, and future investing.
 It is recommend that individuals keep a minimum of three
to six months of salary in a savings account.
 Investments generally have a higher rate of return but are
harder to convert to cash than savings.
 Pay yourself first.
 Develop a savings plan, write it down, and stick to it!
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© Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona