1. Choose to Save
Advanced Level

2. Alexander who used to be rich last Sunday
Bell work:
1. How many of you have ever found yourself in a situation similar to Alexanders?
2. What contributes to your behavior?
3. In general, people are either spenders or savers by nature. Who here considers themselves a spender? How about a saver?
4. Are we stuck in our role as a spender or a saver?

3. Congratulations! You have two job offers!
Each job has a different pay option
You will work five days a week, for four full weeks
Make the best financial choice based on the following situations

4. Which option will you choose?
The Possibilities
Option 1: For the first twenty days of work, you will be paid $200 a day
Option 2: The pay will be 1 penny for the first day. Each day the pay will double. So, it will be 2 pennies the second day, 4 the third, and so on
Which option will you choose?

5. How much would you be paid if you chose option 1?
Option 1 - $200 per day
How much would you be paid if you chose option 1?
20 days
$200
$4,000

6. Option 2 - A Penny Doubled Daily
How much would you be paid if you chose option 2?
Day 1
$ 0.01
Day 2
$0.02
Day 3
$0.04
Day 4
$0.08
Day 5
$0.16
Day 6
$0.32
Day 7
$0.64
Day 8
$1.28
Day 9
$2.56
Day 10
$5.12
Day 11
$10.24
Day 12
$20.48
Day 13
$40.96
Day 14
$81.92
Day 15
$163.84
Day 16
$327.68
Day 17
$655.36
Day 18 $
Day 19 $
Day 20 $

7. Which would you prefer? Powerful Penny! Option 1: $4,000.00 OR

8. Which option would you choose?
If you won the lottery…
Which option would you choose?
Option 1: $1,000,000 today
Option 2: A penny doubled every day for thirty days

9. If you choose the penny, you would have earned $5,368,709.12!
A Million or a Penny?
Day 21
$10,485.76
Day 26
$335,544.32
Day 22
$20,971.52
Day 27
$671,088.64
Day 23
$41,943.04
Day 28
$1,342,177.28
Day 24
$83,886.08
Day 29
$2,684,354.56
Day 25
$167,772.16
Day 30
$5,368,709.12
If you choose the penny, you would have earned $5,368,709.12!

10. Bingo Compound interest Principal Consumption Saving Do it yourself
Savings
Emergency Savings
Time Value of Money
Interest
Opportunity Cost
Interest Rate
Delayed Gratification
Liquidity
Investing
Pay yourself first

11. When you complete a task yourself rather than paying someone else
Do it yourself
Cash set aside to cover the cost of unexpected events
Emergency savings
Setting money aside for long-term goals, involves risk of loss, something of value is purchased and sold
Investing
Value of what you give up to get something else
Opportunity cost

12. Money available at the present time (today) is worth more than the same amount in the future
Time Value of Money
Earning interest on interest
Compound Interest
Accumulation of excess funds by intentionally spending less than you earn
Saving
How quickly and easily assets can be accessed and converted into cash
Liquidity

13. Original amount of money saved or invested
Saving for the future by putting money aside before paying regular monthly bills or using income for discretionary purchases
Pay yourself first
Percentage rate used to calculate interest
Interest rate
Original amount of money saved or invested
Principal
The purchase of goods and services
Consumption

14. Portion of income not spent on consumption
Savings
Waiting to get something so that you can get another item you value more
Delayed gratification
Price paid for using someone else’s money or money earned for letting someone use your money
Interest

15. What is Saving? Results in Saving –
accumulation of excess funds by intentionally spending less than you earn
Savings –
portion of income not spent on consumption (purchase of goods and services)
Results in

16. Short-term goals & expenses
Why Save?
Your present self impacts your future self By saving money today you will have financial security in the future
Emergency savings
Cash set aside to cover the cost of unexpected events
Short-term goals & expenses
Pay for items that aren’t part of a typical spending plan
Financial security
Lower stress
Lower negative emotions
What are examples of emergency expenses?

17. Saving Reduces Financial Risk and Uncertainty
Savings is a monetary asset
Contributes to net worth
Very liquid (can quickly and
easily be converted into cash)
What monetary assets do you have for emergencies?

18. How Much Money Should Be Saved?
At least six months worth of expenses in emergency savings
$2,000 monthly expenses
6 months
$12,000
Depends on…
Income
Job security
Insurance coverage
Dependents

19. Identifying Money to Save
Do It Yourself
Increase Income
Decrease Expenses
Instead of paying someone
Trade-off
Investing time and skills
What can you do yourself to save money?

20. Pay Yourself First Your present self impacts you future self!
Save a predetermined amount of money
Do so before using money for spending
Do so each time you are paid
Make it automatic!

21. Saved Money Provides For Your Future Self….
Interest Rate
Money
Time
… and can increase in value!
Time Value of Money -
money available at the present time (today) is worth more than the same amount if received in the future

23. What is Interest? Interest – the price of money
Interest rate – percentage rate used to calculate interest
Interest may be earned or paid
Depository institutions offer secure accounts to save money
When you don’t withdraw interest earned from an account the interest earns additional interest
Compounding interest – earning interest on interest
Interest - the price of money
Interest rate - percentage rate used to calculate interest
Compounding interest – earning interest on interest

24. How Do Interest Rates Affect The Time Value of Money?
More Money Earned
$1,000 Saved for 5 Years with Compounding Interest

25. More Money Earned Time How Does Time Affect the Time Value of Money?
College Savings Fund
Felix and his parents
Saved for: 18 years
Started when he was born
Contributed: $50/month
Total Contribution: $10,800
Savannah and her parents
Saved for: 4 years
Started when she was a freshman
Contributed: $350/month
Total Contribution: $16,800
Both earned the same interest rate
Both currently have the same balance (about $19,500)
Savannah’s parents contributed significantly more

26. How Does Money Affect the Time Value of Money?
More Money Earned
Money
3% interest for 5 years
Principal
Value of Savings
$100
$115.93
$1,000
$1,159.27
$10,000
$11,592.74
Principal - original amount of money saved or invested

27. Time Value of Money Magic!
Year 20
Interest Earned: $111.07
Amount Investment is Worth: $386.97
Year 15
Interest Earned: $79.19
Amount Investment is Worth: $275.90
Initial Investment (Principal): $ at 7% compounding interest
Year 1
Interest Earned: $7.00
Amount Investment is Worth:
Year 10
Interest Earned: $56.46
Amount Investment is Worth: $196.72
Year 5
Interest Earned: $33.26
Amount Investment is Worth: $140.26
Year 50
Interest Earned: $845.46
Amount Investment is Worth: $

28. Maximize Your Return! Time Money Interest Rate
Save for as long as possible!
Save as much as possible, as often as possible!
Save at the highest interest rate possible!

29. Savings is an Essential Component of a Financial Plan
Reduces future financial uncertainty
Reduces negative emotions
Requires trade-offs be made
Best accomplished when automatic
Opportunity for savings to increase in value