Choose to Save

Advanced Level

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© Take Charge Today – August 2013– Choose to Save– Slide 2Funded 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

What is Saving?

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© Take Charge Today – August 2013– Choose to Save– Slide 3Funded 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

Why Save?

Your present self impacts your future selfBy saving money today you will have financial security in the future

What are examples of emergency expenses?

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© Take Charge Today – August 2013– Choose to Save– Slide 4Funded 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 Uncertainty

Very liquid (can quickly and easily be converted into cash)

Savings is a monetary assetContributes to net worth

What monetary assets do you have for emergencies?

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© Take Charge Today – August 2013– Choose to Save– Slide 5Funded 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 Be Saved?

At least six months worth of expenses in emergency savings

Depends on…

Dependents

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© Take Charge Today – August 2013– Choose to Save– Slide 6Funded 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 anIncome & 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

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© Take Charge Today – August 2013– Choose to Save– Slide 7Funded 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 QuestPart 1: My Wish List

$

$ $

Brainstorm a personal wish list for yourself

Approximately how much does each item cost?

Place a star next to the item you would like to start saving for today

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© Take Charge Today – August 2013– Choose to Save– Slide 8Funded 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

Identifying Money to Save

What are ways to reduce spending?

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© Take Charge Today – August 2013– Choose to Save– Slide 9Funded 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

Identifying Money to Save

Do It Yourself

What can you do yourself to save money?

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© Take Charge Today – August 2013– Choose to Save– Slide 10Funded 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

Create a Savings Plan

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© Take Charge Today – August 2013– Choose to Save– Slide 11Funded 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

Make Sure Your Goal is Realistic!

Ensure the trade-offs are realistic and opportunity cost of what is

given up to save is not too high!

Why can saving be difficult?

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© Take Charge Today – August 2013– Choose to Save– Slide 12Funded 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 QuestPart 2: My Current Spending

Identify three changes you will make to your current income or spending today to start saving for the future

What is the trade-off for each change?

Place a star next to items with a realistic opportunity cost

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© Take Charge Today – August 2013– Choose to Save– Slide 13Funded 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

Pay Yourself First

Your present self impacts you future self!

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© Take Charge Today – August 2013– Choose to Save– Slide 14Funded 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

Saved Money Provides For Your Future Self….

Time Value of Money - money available at the present time (today) is worth more than the

same amount if received in the future

… and can increase in value!

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© Take Charge Today – August 2013– Choose to Save– Slide 15Funded 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

What is Interest?

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© Take Charge Today – August 2013– Choose to Save– Slide 16Funded 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 Do Interest Rates Affect TheTime Value of Money?

Interest Rate

More Money Earned

1% 3% 5%

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

$1,000 Saved for 5 Years with Compounding Interest

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© Take Charge Today – August 2013– Choose to Save– Slide 17Funded 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

TimeMore Money

Earned

How Does Time Affect the Time Value of Money?

Felix and his parentsSaved for: 18 years • Started when he was bornContributed: $50/monthTotal Contribution: $10,800

Savannah and her parentsSaved for: 4 years• Started when she was a freshmanContributed: $350/monthTotal Contribution: $16,800

Both earned the same interest rateBoth currently have the same balance (about $19,500)

Savannah’s parents contributed significantly more

College Savings Fund

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© Take Charge Today – August 2013– Choose to Save– Slide 18Funded 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 Does Money Affect the Time Value of Money?

Principal - original amount of money saved

or invested

MoneyMore Money

Earned

3% interest for 5 years

Principal Value of Savings

$100 $115.93

$1,000 $1,159.27

$10,000 $11,592.74

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© Take Charge Today – August 2013– Choose to Save– Slide 19Funded 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

0

1

5

10

15

20

25

30

35

40

45

50

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

Dollar Value

Year

s

Year 5Interest Earned: $33.26Amount Investment is Worth: $140.26

Year 10Interest Earned: $56.46Amount Investment is Worth: $196.72

Year 15Interest Earned: $79.19Amount Investment is Worth: $275.90

Year 20Interest Earned: $111.07Amount Investment is Worth: $386.97

Year 50Interest Earned: $845.46Amount Investment is Worth: $2945.70

Time Value of Money Magic!

Initial Investment (Principal): $100.00 at 7% compounding interest

Year 1Interest Earned: $7.00Amount Investment is Worth: 107.00

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© Take Charge Today – August 2013– Choose to Save– Slide 20Funded 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

Maximize Your Return!Save for as long

as possible!

Save as much as possible, as often

as possible!

Save at the highest interest rate possible!

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© Take Charge Today – August 2013– Choose to Save– Slide 21Funded 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 QuestPart 3: Implementing My Saving Quest

How will you make the saving process automatic?

How much can you realistically save each week?

How can your goal be reached using the time value of money?

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© Take Charge Today – August 2013– Choose to Save– Slide 22Funded 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 Financial Plan