2. My Wish List MY WISH LIST Brainstorm a personal wish list for yourself. Include anything of monetary value
3. “ TODAY’S SELF HAS AN IMPACT ON FUTURE SELF” What does this statement mean to you?
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5. What is an Asset? Make a list of your assets Examples of Assets Cash Automobiles Houses Furniture Assets - everything an individual owns with monetary value Clothing Electronics Savings Accounts
6. What is Liquidity? Liquidity- how quickly and easily an asset can be converted to cash Less Liquid More Liquid Investments Savings Tools
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8. Why are saving and investing important? Saving Investing Provides the foundation for financial security Enhances and helps build wealth Serve different purposes but both are essential
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11. The Choices You Make Today Impact Your Future! INCREASED WEALTH! SAVING AND INVESTING… INCREASE ASSETS DECREASE LIABILITIES Why is it important to increase wealth?
12. Why are saving and investing important? Money needed to pay for the necessities and comforts currently enjoyed Higher level of living that person wishes to reach Level of Living Standard of Living PRESENT FUTURE Help pay for a level of living and reach a desired standard of living
13. How much money should be saved and invested? At least six months worth of expenses in liquid assets Household with $2,000 per month of expenses = at least $12,000 in savings ($2,000 x 6 months) Save 10-20% of net income every month until appropriate amount of savings is reached SAVINGS Recommended Amount Example How
14. How much money should 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
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19. True or False? Identify if each statement is true or false… They are both true. The time value of money makes this possible! □ 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.
20. 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:
21. What is Interest? Interest - the price of money Interest rate - percentage rate paid on money saved Compounding interest – earning interest on interest
22. How Do Interest Rates Affect Time Value of Money? Interest Rate Larger 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
25. How Does Money Affect the Time Value of Money? Money Larger Return Principal - original amount of money saved or invested
26. Amount of Money 7% interest compounded annually for 5 years Amount of Principal Investment Return $100.00 $40.26 $1,000.00 $402.55 $10,000.00 $4,025.52
27. Time Value of Money Magic! Year 5 Interest Earned: $33.26 Amount Investment is Worth: $140.26 Year 10 Interest Earned: $56.46 Amount Investment is Worth: $196.72 Year 15 Interest Earned: $79.19 Amount Investment is Worth: $275.90 Year 20 Interest Earned: $111.07 Amount Investment is Worth: $386.97 Year 50 Interest Earned: $845.46 Amount Investment is Worth: $2945.70 Initial Investment (Principal): $100.00 at 7% compounding interest Year 1 Interest Earned: $7.00 Amount Investment is Worth: 107.00
28. Maximize Your Return! Invest for as long as possible! Invest as much as possible, as often as possible! Invest at the highest interest rate possible!
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30. What savings goals do you want to reach? Goal - the end result of something a person intends to accomplish Refer to your wish list. These items represent savings goals! Goal setting helps you think about your future self Consider what savings goals you want to reach
31. Consequences 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 ! Consider what savings goals you want to reach Evaluate the consequences of that goal
32. Consequences of Goals- 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 !
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35. Set SMART Goals Write a SMART goal for one of the items on your wish list. MY WISH LIST Consider what savings goals you want to reach Evaluate the consequences of that goal Write a SMART goal
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39. Saving Financial security and a positive level of living Investing Wealth accumulation and a desired standard of living Summary- What is the purpose of saving and investing money and why is it important? Think about your future self!
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Editor's Notes
Changed the font the old one (rage italic) was too hard to read
