pennies make dollars

1. Do I have 3-6 months living expenses in an emergency fund?

2. Do I save regularly?

3. Am I saving enough for future high cost goals (education, house)?

4. Do I save to purchase big ticket items instead of buying on credit?

Seven Questions About Seven Questions About Your SavingsYour SavingsSeven Questions About Seven Questions About Your SavingsYour Savings

5. When I use credit, do I save to make as large a down payment as possible?

6. Do I set aside enough into another account to cover my periodic expenses?

7. Am I saving enough for my retirement?

Seven Questions About Your Seven Questions About Your Savings continuedSavings continuedSeven Questions About Your Seven Questions About Your Savings continuedSavings continued

The more times you The more times you answeranswer ““yesyes”” to these to these

questions, the more likely questions, the more likely you are ayou are a

prudent saver. prudent saver.

AnyAny ““nono’’ss”” can can help you identify help you identify areas where you areas where you could do bettercould do better.

The more times you The more times you answeranswer ““yesyes”” to these to these

questions, the more likely questions, the more likely you are ayou are a

prudent saver. prudent saver.

AnyAny ““nono’’ss”” can can help you identify help you identify areas where you areas where you could do bettercould do better.

Small change makes Big Money!!!Small change makes Big Money!!!

Value in 20 years if invested in a mutual fundwith a 9% annual return.

Item Cost Yearly Cost If you investamount in 2020, itwould be worth . . .

Soft Drink 75¢ per can,5 times a week

$195 $10,192

Pedicure $35 persession, 4 timesa year

$210 $11,595

FrozenYogurt

$3 for a large,2 times a week

$312 $15,962

MovieTickets

$20 per week(tickets,snacks)

$1,040 $53,207

Source: Modern Maturity, July-August 2000

putting money aside from present earnings to provide for the future.

WHY WE NEED TO SAVEWHY WE NEED TO SAVE

Everyday Emergencies

Loss of Income

Retirement

Special Family Goals

Irregular Expenses

Emergency !!!!Emergency !!!!What would YOU do if this What would YOU do if this happens?happens?

Karen has a serious dental problem. The dental bill is already $800 with more dental care needed. No dental insurance. No savings. No credit card limit remains.

$ Set up a regular plan

$ Pay yourself first

$ Payroll deduction

$ Save bonus money

$ Save coupon money

$ Pay installments to yourself

$ Save loose change

$ Break a habit

$ Save lunch money

$ Buy items on sale

$ “Nothing Week”

$ Use a “Crash Budget”

$ Evaluate all spending decisions

P. Y. F. RuleP. Y. F. Rule

PayPay

YourselfYourself

FirstFirst

SAVING WEEKLY AT SAVING WEEKLY AT 5% INTEREST

Amount Saved Value AfterAmount Saved Value AfterPer WeekPer Week 10 Years 10 Years

$ 7.00 $ 4,720 14.00 9,440 21.00 14,160

28.00 18,880 35.00 23,600

Break a HabitBreak a Habit

ItemItem Frequency Price Savings/year Frequency Price Savings/yearSoft drink/teaSoft drink/tea 1/day1/day $1.50 $1.50 $ 547.50$ 547.50

BeerBeer 1/day1/day $3.00 $3.00 $1095.00$1095.00

MagazineMagazine 2/month2/month $7.98 $7.98 $ 191.50$ 191.50

Movie ticketsMovie tickets 2/week2/week $22.00 $22.00 $1141.00$1141.00

__________________________ ________________ ______________ ________________

TotalTotal $2978.00$2978.00

Regular

Money Market

Certificates of Deposit

Saver’s Club

Government Savings Bonds

Interest = Interest = Principle x Rate x TimePrinciple x Rate x Time

= $1,000 x 2% x 1 year

= $20

Principle left in account 2 yearsPrinciple left in account 2 years

= 2 x $20

= $40

SIMPLE INTERESTSIMPLE INTERESTSIMPLE INTERESTSIMPLE INTEREST

COMPOUND INTERESTCOMPOUND INTERESTFirst YearFirst YearInterest = Interest = Principle x Rate x TimePrinciple x Rate x Time

= $1,000 x 2% x 1 year = $20

Second YearSecond Year Interest = (Interest = (Principle + Interest) x Rate x TimePrinciple + Interest) x Rate x Time

= ($1,000 + $20) = $1,020 x 2% x 1 year

= $20.40

2 Year Interest Total2 Year Interest Total$20 + $20.40 = $40.40$20 + $20.40 = $40.40

Simple Interest = $240Simple Interest = $240

Compound Interest = $240.40Compound Interest = $240.40

Difference = $.40Difference = $.40

72

INTEREST RATE==

YEARS TO DOUBLE INVESTMENT

OROR72

YEARS TO DOUBLE INVESTMENT

INTEREST RATE REQUIRED==

Savings is the process of Savings is the process of

telling your money where telling your money where

to go - rather than asking to go - rather than asking

where it went !where it went !

SIMPLE SAVINGS PLANSIMPLE SAVINGS PLAN

Save over $2,000 in 4 yearsSave over $2,000 in 4 years

Year 1Year 1Put $10 per week into a CD, earning 3.5% interest, compounded monthly.

Total in savings account at end of Year..$529.12

Purchase a 3-year Certificate of Deposit (CD)

Year 2Year 2Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account at end of Year..$529.12

Purchase a 2-year Certificate of Deposit (CD)

Year 3Year 3Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account end of Year 3….$529.12

Purchase a 1-year Certificate of Deposit (CD)

Year 4Year 4Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account end of Year 4….$529.12

Adding It UpAdding It UpTotal in savings account…………..….…$529.12

Value of 3-year CD at end of year 4….... 619.17

Value of 2-year CD at end of year 4….... 584.78

Value of 1-year CD at end of year 4….... 555.68

Total saved/earned in 4 years...$2,288.75

Would You Like to Have $50,000 Would You Like to Have $50,000 or $100,000?or $100,000?

# of Years

Amount to Save Yearly to Have

$50,000*

Amount to Save Yearly to Have

$100,000*

10 $3,793 $7,587

15 $2,148 $4,296

20 $1,359 $2,718

* Earning 6% annual interest

What to Consider When Opening a Savings Account

Yield - APR? Compounding? Liquidity Safety Minimum Deposit Convenience Charges Other Services

The Emergency Fund

to coverto cover3 to 6 months3 to 6 months’’ living living expenses in readily expenses in readily available accountsavailable accounts