1. Choosing to Save Essentials
Advanced Level

2. Brainstorm a personal wish list for yourself now and in the future
My Wish List
Brainstorm a personal wish list for yourself now and in the future
My Wish List
Your wish list can include anything of monetary value as well as personal achievements

3. “Today’s self has an impact on future self”
What does this statement mean to you?
“Today’s self has an impact on future self”

4. Saving vs. Investing Investing Savings
Portion of current income not spent on consumption
Purchase of assets with the goal of increasing future income
Money saved is used to pay for:
Money invested is used to pay for:
Emergencies
Large Purchases
Higher Education
Retirement

5. What is an Asset?
Assets- everything an individual owns with monetary value
Examples of Assets
Cash
Clothing
Houses
Electronics
Savings Accounts
Automobiles
Furniture
Make a list of your assets

6. What is Liquidity? Would any of your assets provide cash
Liquidity- how quickly and easily an asset can be converted to cash
More Liquid
Savings Tools
Less Liquid
Investments
Savings are known as liquid assets, because they are easily accessible in emergency situations
Would any of your assets provide cash
to fund an emergency?

7. Why are Saving & Investing Important?
Serve different purposes in an individual’s finances but are both essential
Savings
Investing
Provides the foundation for financial security by providing funds in case of emergency
Enhances and helps build wealth- measurement of how much a person or household owns once all debts have been paid

8. The Choices You Make Today Impact Your Future!
Saving and investing…
Increase the amount you own- your assets
Decrease the amount you owe- your liabilities
Increased Wealth!
Why is it important to increase wealth?

9. Financial Life Cycle
Stage 3: Wealth Distribution
Stage 2: Wealth Accumulation
Stage 1: Wealth Protection
There is a typical financial life cycle pattern that applies to most people

10. Stage One: Wealth Protection
Characteristics
Recommended Amount
Includes saving
Focuses on building financial security
10-20% of net income
At least 6 months of expenses saved in liquid assets

11. Stage Two: Wealth Accumulation
Characteristics
Recommended Amount
Includes investing
Focuses on wealth accumulation
Stage one (saving) should be a prerequisite to stage 2 (investing)
10-20% of net income

12. Stage Three: Wealth Distribution
Characteristics
Consumption of wealth
Usually during retirement

13. Saving vs. Investing Activity
Determine if the characteristic describes saving or investing
Characteristic:
Builds Wealth
Saving or Investing:
Investing

14. Saving vs. Investing Activity
Characteristic:
More Liquid
Saving or Investing:
Saving

15. Saving vs. Investing Activity
Characteristic:
Used to pay for emergencies
Saving or Investing:
Saving

16. Saving vs. Investing Activity
Characteristic:
Stage 2 of the
Financial Life cycle
Saving or Investing:
Investing

17. Where Can Money Be Saved?
A depository institution
A business that offers banking and finance services, such as savings and investment tools
When money is saved or invested at a depository institution, an individual can take advantage of the time value of money
What is the name of a depository institution in your community?

18. Three factors affect how an investment will grow.
Time Value of Money
Money paid out or received in the future is not equivalent to money paid out or received today
Three factors affect how an investment will grow.
Interest Rate
Money
Time

19. Interest is the price of money.
What is Interest?
Interest is the price of money.
Interest rate is the percentage rate paid on the money invested or saved

20. How Do Interest Rates Affect Time Value of Money?
More Money
$1,000 invested for 5 years
Interest Rate
Amount Investment is Worth 1%
$1,051.01 3%
$1,159.27 5%
$1,276.28 7%
$1,402.55 9%
$1,538.62
Every depository institution will offer different interest rates on their savings and investment tools

21. How Does Time Affect the Time Value of Money?
Interest Rate
Money
Time
The longer an individual invests, the more time their investment has to increase in value

22. How Does the Amount of Money Affect the Time Value of Money?
Larger Return
7% interest compounded annually for 5 years
Amount of Principal Investment
Return on Investment
$100.00
$40.26
$1,000.00
$402.55
$10,000.00
$4,025.52

23. 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: $ at 7% 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: $

24. Maximizing Your Return
Time
Invest for as long as possible!
Amount of Money
Invest as much as possible, as often as possible!
Interest
Invest at the highest interest rate possible!
Make the time value of money work to your advantage!

25. Wish List Refer to your wish list
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 an item on your wish list?
That is known as a trade-off!

26. Trade-offs What is the value of this trade-off to you? 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!

27. Opportunity Cost
Opportunity cost is the value of the next best alternative that must be forgone when a trade-off is made
Allows you to analyze the consequences of choices to decide which trade-offs to make

28. Spending Plans
When analyzing trade-offs and opportunity costs of a financial decision, current spending and spending plans should be considered A spending plan is a document used to record both planned and actual income and expenditures over a period of time

29. Goals
After analyzing the trade-offs and opportunity costs of a decision and evaluating current spending plans, you can then set a goal!
Goal - the end result of something a person intends to acquire, achieve, do, reach, or accomplish
Financial Goal - specific objective to be accomplished through financial planning
Goal setting helps you think about your future self
Financial goals should be SMART goals

30. SMART Goals Specific Measurable Attainable Realistic Time Bound
State exactly what is to be done with the money involved
Specific
Write the exact dollar amount the goal is for
Measurable
Determine how it can be reached, which is often determined by an individual’s budget
Attainable
Do not set goal for something unattainable or unrealistic
Realistic
Specifically state when the goal needs to be reached
Time Bound
By analyzing trade-offs, opportunity cost, and spending plans before setting a goal, goals become more attainable and realistic

31. Write a SMART goal for one of the items on your wish list
Set SMART Goals
Now that trade-offs, opportunity costs, and spending plans have been considered:
Write a SMART goal for one of the items on your wish list
My Wish List

32. Make Saving and Investing Automatic
To help reach financial goals, saving and investing should be considered a fixed expense that is automatic
Pay yourself first is a saving strategy that means to set aside a predetermined portion of money for saving before any money is used for spending

33. Summary- What is the purpose of saving and investing money?
Financial security and a positive level of living
Saving
Wealth accumulation
and a desired
standard of living
Investing

34. To practice smart saving and investing habits …
Save 10-20% of net income in liquid assets until at least 6 months of expenses are reached
Continue to invest 10-20% of income
to increase wealth
Utilize the time value of money
to your greatest advantage

35. in order to save and invest 10-20 % of Net Income, follow this process…
Consider the opportunity costs of those trade-offs
Examine trade-offs that can be made
Evaluate current spending plan
Set a SMART goal (includes adjusting spending plans)
Make saving and investing automatic
Utilize the time value of money