introduction to saving family economics & financial education take charge of your finances
TRANSCRIPT
Introduction to Saving
Family Economics & Financial EducationTake Charge of Your Finances
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
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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.
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded 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
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded 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 Saving
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 March 2009 – Saving Unit – Introduction to SavingsFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
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Saving vs. Investing cont. Investing
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 March 2009 – Saving Unit – Introduction to SavingsFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
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Reasons People Should Save 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 March 2009 – Saving Unit – Introduction to SavingsFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
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Why People Don’t Save 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 March 2009 – Saving Unit – Introduction to SavingsFunded 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 your 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.
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded 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” Put money away into a savings
account or investment BEFORE you pay other bills or use for spending.
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded 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
© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to SavingsFunded 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!