SAVING and INVESTING to achieve your financial goals or HOW MONEY WORKS.

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Presentation transcript:

SAVING and INVESTING to achieve your financial goals or HOW MONEY WORKS

Why Save? Financial Emergency Seasonal Expenses Financial Goals

Financial Emergencies Accidents Unemployment Legal Problems Etc.

Seasonal Expenses Vacations Holidays

Financial Goals Car House College

Calculating Interest I = P x R x T

The Time Value of Money Relationship of time, money and interest rate and their impact on savings.

Three Factors Determine Wealth TIME MONEY RATE OF INTEREST

TIME The more time you have to save, the more money you will have.

MONEY The more money you have to save, the more money you will have.

RATE OF INTEREST The higher the rate of interest you earn, the more money you will have

TIME IS ON YOUR SIDE! The younger you start your savings habit the better off you will be!

Meet Bob Younger and Jane Older sup

BOB STARTS EARLY

BOB INVESTS $2,000 a year for nine years, from the time he is 22 to the time he is 29. TOTAL INVESTMENT = $18,000

JANE STARTS LATER JANE INVESTS $2,000 a year from age 30 to age 65. TOTAL INVESTMENT $72,000

WHO HAS MORE? I do! Oh yeah?

At the age of Jane will have $470,249 Bob will have $579,471 (based on an APR of 6%) Bob only invested $18,000 compared to Jane’s $72,000 and he has more money

SO Remember.. Start saving young and be like me!

So You Want to be a Millionaire?

NOT CONVINCED YET?

Three Letters To Remember

They Stand For...

Pay Yourself First Before you pay bills or buy things pay yourself Treat savings as an expense, not as something extra Helps you take advantage of the time value of money

Pay Yourself First Follow the guideline –Spend 70% –Save 20% for short term goals, seasonal expenses and financial emergencies –Invest 10% for the longer term

When is the best time to start saving? NOW! You may think you don’t have enough money to start saving... THE AMOUNT YOU SAVE IS NOT NEARLY AS IMPORTANT AS ESTABLISHING THE HABIT!

Three More Letters To Remember

They Stand For...

THE FINANCIAL PLANNING PYRAMID COVER YOURSELF SAFE INVESTMENTS A LITTLE MORE RISK HIGH RISK / HIGH REWARD ONCE YOU HAVE YOURSELF COVERED, TAKE MORE FINANCIAL RISKS!

The “Rule of 72” A quick way to estimate how your money can grow Divide 72 by the interest rate you expect to earn This will show you how long it takes to double your money

The “Rule of 72” For example: –YOUR INTEREST RATE IS 7% –It will take you 72 7 It takes about 10 years to double your income at 7% = 10