This document provides information about personal finance concepts like saving, investing, assets, and net worth. It discusses the importance of saving and investing for goals like emergencies, education, and retirement. Key points covered include: - Saving provides financial security while investing is intended to build wealth over time. - Factors like interest rates, time, money invested, and compounding interest can significantly impact the total return on savings and investments. - Starting to save and invest early and contributing as much as possible each period can maximize what one's money earns over many years due to compound interest. - Developing the habits of saving a portion of income regularly and investing for the long-term are important

1. 1.14.1.G1
Choosing to Save
“Take Charge of Your Finances”
Advanced Level
Personal Finance Objective 8.01

2. 1.14.1.G1
My Wish List
Brainstorm a personal wish
list for yourself.
MY
WISH
LIST
Include anything of monetary value
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

3. 1.14.1.G1
What does this statement mean to you?
“TODAY’S SELF HAS
AN IMPACT ON
FUTURE SELF”
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

4. 1.14.1.G1
What is the difference
between saving and investing?
Saving Investing
Purchase of assets
Portion of current
with the goal of
income not spent
increasing future
on consumption
income
Used to pay Used to pay for:
for:
•Emergencies •Higher Education
•Large Purchases •Retirement
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

5. 1.14.1.G1
What is an Asset?
Assets- everything an individual
owns with monetary value
Examples of Assets
Cash Clothing
Electronics Houses
s
Automobiles c count F
Savings A urniture
Make a list of your assets
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

6. 1.14.1.G1
What is Liquidity?
Liquidity- how quickly and easily an
asset can be converted to cash
Less Investments Savings More
Liquid Tools Liquid
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

7. 1.14.1.G1
Liquid Assets
Savings Liquid Accessible in
Tools Assets emergencies
Would any of your assets provide cash
to fund an emergency?
Brainstorm: What items are liquid? (can be
easily turned into cash)
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

8. 1.14.1.G1
Why are saving and investing
important?
Serve different purposes but both are
essential
Saving Investing
Provides the Enhances and
foundation for helps build
financial wealth
security
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

9. 1.14.1.G1
What is wealth and how is it
measured?
Wealth - measurement of how much a
person owns once all debts have been
paid
Why do you think wealth is not just your assets?
Net worth statement - describes a
person’s overall financial condition on a
specified date
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

10. 1.14.1.G1
Who is Wealthier?
Alexis – earns $100,000 per year
Juanita’s Net Worth
Statement Alexis’ Net Worth Statement
Assets Assets
Home $75,000
Home $60,000
Retirement $35,000
Retirement $24,000 Automobile $8,000
Automobile $8,000 Total Assets $118,000
Total Assets $92,000 Liabilities
Liabilities College loan $10,000
Automobile loan $4,000
College loan $6,000
Credit card debt $20,000
Mortgage $35,000
Mortgage $65,000
Total Liabilities $41,000 Total Liabilities $99,000
Net Worth $51,000 Net Worth $19,000
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

11. 1.14.1.G1
Net Worth Calculation
• Todd has a home worth $120,000 with a
mortgage of $72,000. Current value of his
car is $16,000 but he owes the bank
$2500. Todd has $35,700 in his 401K
retirement account. His current credit card
balance is $1250.
• Calculate Todd’s current Net Worth.
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

12. 1.14.1.G1
The Choices You Make Today
Impact Your Future!
SAVING AND INVESTING…
INCREASE DECREASE
ASSETS LIABILITIES
INCREASED WEALTH!
Why is it important to increase wealth?
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

13. 1.14.1.G1
Why are saving and investing
important?
Help pay for a level of living and
reach a desired standard of living
Level of Living Standard of Living
Money needed to pay for
Higher level of living that
the necessities and comforts
person wishes to reach
currently enjoyed
PRESENT FUTURE
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

14. How much money should
1.14.1.G1
be saved and invested?
SAVINGS
Recommended At least six months worth of
Amount expenses in liquid assets
Household with $2,000 per
month of expenses = at least
Example $12,000 in savings
($2,000 x 6 months)
Save 10-20% of net income
How every month until appropriate
amount of savings is reached
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

15. How much money should
1.14.1.G1
be saved and invested?
INVESTING
Make sure an appropriate
amount of savings is accessible
Redirect goals from saving to
investing
Continue to invest 10-20% of
net income every month
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

16. 1.14.1.G1
Saving vs. Investing Activity-
Does the characteristic describe
saving or investing?
Characteristic:
BUILDS WEALTH
Saving or Investing:
INVESTING
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

17. 1.14.1.G1
Saving vs. Investing Activity
Characteristic:
USED TO PAY FOR
EMERGENCIES
Saving or Investing:
SAVING
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

18. 1.14.1.G1
Saving vs. Investing Activity
Characteristic:
PROVIDES THE FOUNDATION
FOR FINANCIAL SECURITY
Saving or Investing:
SAVING
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

19. 1.14.1.G1
Saving vs. Investing Activity
Characteristic:
LESS LIQUID
Saving or Investing:
INVESTING
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

20. 1.14.1.G1
True or False?
Identify if each statement is true or false…
If Janie makes a one time investment of $500 at
age 20 in a tool that earns the historic 12%
□
average, by age 60 the $500 will become
$46,525.
If Samuel invests $3,000 annually from ages 22-
31 (a total of $30,000 invested) in a tool earning
□
10% interest, he will have $1.2 million dollars by
age 65.
They are both true. The time value of money
makes this possible!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

21. 1.14.1.G1
What is the Time Value of
Money?
Money paid out or received in the future is
not equivalent to money paid out or
received today
Factors that make
the time value of
money possible:
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

22. 1.14.1.G1
What is Interest?
Interest - the price of money
Interest rate - percentage rate
paid on money saved
Compounding interest –
earning interest on interest
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

23. 1.14.1.G1
How Do Interest Rates Affect Time
Value of Money?
Interest Larger
Rate Return
Return- profit generated by saving and investing
$1,000 invested for 5 years
Interest Rate (compounding) Amount Investment is
Worth
1% $1,051.01
3% $1,159.27
5% $1,276.28
7% $1,402.55
9% $1,538.62
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

24. 1.14.1.G1
How Does Time Affect the Time
Value of Money?
Larger
Time
Return
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

25. 1.14.1.G1
A Little Goes a
Long Way
Sally puts away
Sally invests a total
$3,000 per year for
of $30,000 and has
10 years, at age 22.
earned $1,205,063
She earns 10% on
by the age of 65
her investment
Ed waits until he is Ed invests a total of
28 and contributes $111,000 and
$3,000 at 10% for accumulates
37 years $1,079,856 by the
age of 65
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

26. 1.14.1.G1
How Does Money Affect the Time
Value of Money?
Larger
Money
Return
Principal -
original amount
of money saved
or invested
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

27. 1.14.1.G1
Amount of Money
7% interest compounded
annually for 5 years
Amount of Principal
Return
Investment
$100.00 $40.26
$1,000.00 $402.55
$10,000.00 $4,025.52
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

28. 1.14.1.G1
Time Value of Money Magic!
Year 20
Year 15 Earned: $111.07
Interest
Initial Investment (Principal): $100.00 at
Year Amount Investment is Worth: $386.97
10
Interest Earned: $79.19
7% compounding interest
Year Amount Investment is Worth: $275.90
5
Interest Earned: $56.46
Year 1 Earned: $33.26 is Worth: $196.72
Interest
Amount Investment
Interest Earned: $7.00 is Worth: $140.26
Amount Investment
Amount Investment is Worth: 107.00
Year 50
Interest Earned: $845.46
Amount Investment is Worth: $2945.70
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

29. Maximize
1.14.1.G1
Your Invest for as
Return! long as possible!
Invest as much as
possible, as often
as possible!
Invest at the
highest interest
rate possible!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

30. 1.14.1.G1
How do I begin to save money?
Follow this process…
Consider what savings goals you want to reach
Evaluate the consequences of that goal:
1.What trade-offs will you have to make?
2.What is the opportunity cost of those trade-offs?
3.How will the trade-offs made affect your spending plan?
Write a SMART goal
Make saving automatic
Let’s learn the details of this process…
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – 30
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

31. 1.14.1.G1
What savings Consider what savings goals you want to reach
goals do you
want to reach?
Refer to your wish list.
These items represent savings goals!
Goal - the end result of something a
person intends to accomplish
Goal setting helps you think about
your future self
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 31
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

32. 1.14.1.G1
Consequences
Consider what savings goals you want to reach
Evaluate the consequences of that goal
of Goals
Do you currently have enough money to
acquire all of the items on your wish
list?
If not, what are you willing to give up in
order to acquire one of these items?
That is known as a trade-off!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 32
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

33. Consequences of Goals-
1.14.1.G1
What is a Trade-off?
Trade-off -
Giving up one thing for another
Every decision inevitably involves a trade-off
What is the value of this
trade-off to you?
That is known as opportunity cost!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 33
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

34. Consequences of Goals-
1.14.1.G1
What is Opportunity Cost?
Opportunity cost - value of the next
best alternative that must be
forgone when a trade-off is made
Allows you to analyze the
consequences of choices to
decide which trade-offs to make
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 34
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

35. 1.14.1.G1
Consequences of Goals-
Spending Plans
To reach your savings goal you identified
trade-offs that would be made. How will
these trade-offs affect your spending plan?
Spending plan - document used to record both
planned and actual income and expenses over
a period of time
Adjust your spending plan accordingly
Income OR Expenses
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 35
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

36. 1.14.1.G1
Consider what savings goals you want to reach
Set SMART Evaluate the consequences of that goal
Goals Write a SMART goal
Write a SMART goal for one of the
items on your wish list.
MY
WISH
LIST
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 36
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

37. 1.14.1.G1
Make Saving
Consider what savings goals you want to reach
Evaluate the consequences of that goal
and Investing Write a SMART goal
Automatic Make saving automatic
• Make your goal happen automatically
• Pay yourself first - saving strategy that
means to set aside a predetermined
portion of money for saving before any
money is used for spending
Save then spend!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 37
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

38. 1.14.1.G1
How can saving and investing
become automatic?
Automatic Transfers
•Most depository institutions allow
automatic transfers between accounts
•Designated amount of money will be
automatically moved into a saving or
investing tool every month
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 38
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

39. How can saving and 1.14.1.G1
investing
become automatic?
Payroll Deduction
•Offered by most employers
•Employees designate money from
their paycheck be deposited into an
account of their choice
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 39
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

40. 1.14.1.G1
Summary-
What is the purpose of saving and
investing money and why is it
important?
Financial security and a
Saving positive level of living
Wealth accumulation
Investing and a desired
standard of living
Think about your future self!
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 40
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

41. 1.14.1.G1
To practice smart saving and
investing habits …
Save 10-20% of net income in liquid assets until
it equals at least 6 months of expenses
Continue to invest 10-20% of income
to increase wealth
Utilize the time value of money
to your greatest advantage
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – Slide 41
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

42. Choose to Save!
1.14.1.G1
Follow this process…
Consider what savings goals you want to reach
Evaluate the consequences of that goal:
1.What trade-offs will you have to make?
2.What is the opportunity cost of those trade-offs?
3.How will the trade-offs made affect your spending plan?
Write a SMART goal
Make saving automatic
© Family Economics & Financial Education – Revised May 2011 – Savings Unit – Choosing to Save – 42
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona