1.14.1.G1 Choosing to Save“Take Charge of Your Finances”       Advanced LevelPersonal Finance Objective 8.01
1.14.1.G1                                                     My Wish List                                       Brainstor...
1.14.1.G1                            What does this statement mean to you?                          “TODAY’S SELF HAS     ...
1.14.1.G1                What is the difference             between saving and investing?                                 ...
1.14.1.G1                                   What is an Asset?                       Assets- everything an individual      ...
1.14.1.G1                                       What is Liquidity?                                 Liquidity- how quickly ...
1.14.1.G1                                                    Liquid Assets                         Savings                ...
1.14.1.G1                Why are saving and investing                        important?                        Serve diffe...
1.14.1.G1                  What is wealth and how is it                          measured?                      Wealth - m...
1.14.1.G1                             Who is Wealthier?                                                                   ...
1.14.1.G1             Net Worth Calculation• Todd has a home worth $120,000 with a  mortgage of $72,000. Current value of ...
1.14.1.G1                       The Choices You Make Today                           Impact Your Future!                  ...
1.14.1.G1                  Why are saving and investing                          important?                               ...
How much money should                                                                                                     ...
How much money should                                                                                                     ...
1.14.1.G1           Saving vs. Investing Activity-                           Does the characteristic describe             ...
1.14.1.G1             Saving vs. Investing Activity                                                          Characteristi...
1.14.1.G1             Saving vs. Investing Activity                                                        Characteristic:...
1.14.1.G1             Saving vs. Investing Activity                                                        Characteristic:...
1.14.1.G1                                                 True or False?                             Identify if each stat...
1.14.1.G1                  What is the Time Value of                           Money?                       Money paid out...
1.14.1.G1                                    What is Interest?                               Interest - the price of money...
1.14.1.G1                    How Do Interest Rates Affect Time                           Value of Money?                  ...
1.14.1.G1                How Does Time Affect the Time                      Value of Money?                               ...
1.14.1.G1                                                   A Little Goes a                                               ...
1.14.1.G1               How Does Money Affect the Time                     Value of Money?                                ...
1.14.1.G1                                      Amount of Money                                              7% interest co...
1.14.1.G1Time Value of Money Magic!                                            Year 20                                    ...
Maximize                                                                                                                  ...
1.14.1.G1How do I begin to save money?                                   Follow this process…  Consider what savings goals...
1.14.1.G1               What savings                                                                     Consider what sav...
1.14.1.G1          Consequences                                                                                           ...
Consequences of Goals-                                                                                                    ...
Consequences of Goals-                                                                                                    ...
1.14.1.G1                         Consequences of Goals-                             Spending Plans            To reach yo...
1.14.1.G1                                                                                           Consider what savings ...
1.14.1.G1           Make Saving                                                                                           ...
1.14.1.G1                 How can saving and investing                      become automatic?                             ...
How can saving and                                                                               1.14.1.G1                ...
1.14.1.G1                     Summary-          What is the purpose of saving and           investing money and why is it ...
1.14.1.G1                    To practice smart saving and                         investing habits …        Save 10-20% of...
Choose to Save!                                                                                                           ...
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  • 8.01 ppta choosing to save

    1. 1. 1.14.1.G1 Choosing to Save“Take Charge of Your Finances” Advanced LevelPersonal Finance Objective 8.01
    2. 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 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    3. 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 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    4. 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 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    5. 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 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    6. 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 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    7. 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 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    8. 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 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    9. 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 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    10. 10. 1.14.1.G1 Who is Wealthier? Alexis – earns $100,000 per year Juanita’s Net Worth Statement Alexis’ Net Worth StatementAssets Assets Home $75,000Home $60,000 Retirement $35,000Retirement $24,000 Automobile $8,000Automobile $8,000 Total Assets $118,000 Total Assets $92,000 LiabilitiesLiabilities College loan $10,000 Automobile loan $4,000College loan $6,000 Credit card debt $20,000Mortgage $35,000 Mortgage $65,000Total 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. 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. 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 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    13. 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 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    14. 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 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    15. 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 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    16. 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 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    17. 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 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    18. 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 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    19. 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 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    20. 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 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    21. 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 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    22. 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 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    23. 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 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    24. 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 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    25. 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 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    26. 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 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    27. 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 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    28. 28. 1.14.1.G1Time 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. 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 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    30. 30. 1.14.1.G1How 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. 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 31Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    32. 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 32Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    33. 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 33Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    34. 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 34Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    35. 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 35Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    36. 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 36Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    37. 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 37Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    38. 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 38Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    39. 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 39Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    40. 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 40Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    41. 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 41Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    42. 42. Choose to Save! 1.14.1.G1 Follow this process… Consider what savings goals you want to reachEvaluate 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

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