Introduction to Saving & Investing Family Economics & Financial Education Take Charge of Your Finances

© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to Savings – 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 G1 Saving Versus Investing  Saving: Putting aside money for the primary purpose of having money for the future.  Investing: Putting aside money for the primary purpose of earning interest over time.

© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to Savings – 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 G1 Savings Account Uses  Daily Expenses  Emergencies  Future Purchases  Future Investing

© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to Savings – 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 G1 Saving  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 Savings – 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 G1 Investing  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 Savings – 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 G1 Similarities  Both provide a place to store money.  Both represent positive financial growth.  Both provide a return on investment with interest.

© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to Savings – 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 G1 Differences  Amount of return. (How much will be earned?)  Degree of risk. (Higher risk = Higher return)  Degree of volatility (Some investments change faster than others; thus, the higher risk for the investment.)  Degree of liquidity (Savings is more accessible for emergency funds than investments.)

© Family Economics & Financial Education – Revised March 2009 – Saving Unit – Introduction to Savings – 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 G1 Financial Security: Reasons People Should Save Financial experts recommend individuals keep a minimum of three to six months of salary in a savings account.  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, 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 Savings – 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 G1 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 Savings – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 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 Savings – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G 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 Savings – 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 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!