Chapter 2: Saving.

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Chapter 2: Saving This chapter emphasizes the importance of saving and explains the three reasons to save: emergencies, large purchases, and wealth building.

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Presentation transcript:

Chapter 2: Saving

2.1 Saving: An Exercise in Character

The Five Foundations Save a $500 Emergency Fund Get out of Debt Pay Cash for Your Car Pay Cash for College Build Wealth and Give Next to each foundation, write down a way you could make this happen.

America’s Savings Rate

America’s Saving Rate We are reactionary!!!!

Saving for an Emergency Fund The first foundation is $500 in an emergency fund Your expenses are different than your parents… think broken cell phone or flat tire 78% of people will experience a major negative event in a 10 year time period An emergency fund is your money for surprise expenses which prevents you from going in to debt. Debt never solves a problem.

Saving for an Emergency Fund When you’re on your own, you’ll want to grow your fund to 3- 6 months of expenses. Will your emergency fund always be the same? This money should be kept in the bank only! Could be in a separate savings account.

Saving for an Emergency Fund Saving $500 quick – How can we do this? Starting your own business Name Business Age Worth Sean Belnick Sells furniture online 14 $42 mill Fraser Doherty SuperJam $2 mill Cameron Johnson Greeting cards 9 $3.2 mill Juliette Brindack “Miss O” books and website 10 $15 mill Farrah Gray Body lotion and food service 6/13 $20 mill

Journal Question What has kept you from saving in the past? How might you change this?

Savings by Nation Find the mean and median for this data.

Savings by Nation What are some possible reasons for the low savings rate in the US? With a take home pay of $40,000 how much would a family in Japan save? France? The U.S?

2.2 Three Basic Reasons to Save

Three Basic Reasons Emergency Fund Make Purchases Build Wealth

Emergency Fund and Purchases Emergencies are going to happen. Period. Leave. It. Alone. Is saving just a few dollars a month worth it? Purchases Instead of borrowing, use a sinking fund. Think of something that you need or want… How much is it going to cost? How long do you have to save for it? Cost ÷ Months = $/month to save

3. Wealth Building You need discipline if you want to build wealth. Wants vs. needs and compromise Building wealth is a marathon, not a sprint When should you start building wealth?

Journal Question Why do you think so many people borrow money for large purchases instead of using a sinking fund?