1. The Secrets of Saving
Introductory Level

2. Do you know what will happen tomorrow?
What is Savings?
Savings - portion of income not spent on current expenses
Do you know what will happen tomorrow?
Because the future is unpredictable
Money should be saved to pay for unexpected events or emergencies
Slide 2: What is Savings?
i. Ask participants to share what they believe savings is.
ii. Discuss the definition of savings.
iii. Ask participants if they know what will happen tomorrow? Discuss the importance of
saving for the unexpected.
1. No, we don’t know what will happen tomorrow. Emergencies and unexpected events happen all the time and it is important to save money to pay for these unexpected expenses.

3. Why is it important to save money?
1. Without savings, unexpected events can become large financial burdens
2. Helps people become financially secure
Slide 3: Why is it important to save money?
i. Explain to participants that having money saved helps an individual or family become financially secure, because savings helps unexpected expenses to not become financial burdens.
ii. Explain to participants that in real-life, money isn’t hidden and found in a scavenger hunt.
If an unexpected expense occurs, money cannot be found in a scavenger hunt!

4. What are other reasons a person would want to save money?
Buy items that are too expensive to be purchased with monthly income
Vacation
Car
Furniture
Slide 4: What are other reasons a person would want to save money?
i. Explain to participants that people can also save money to purchase expensive items that are not included in their monthly spending plan.
2. Video: Show participants the video clip produced by Schoolhouse Rock titled “Where The Money Goes.” The video clip is 3:04 minutes long.
a. The video clip can be found on any of the following websites:
i. SchoolTube:
ii. WatchKnow:
iii. YouTube:
b. This video may also be purchased. It is included in the “Schoolhouse Rock: Money Rock- Season 6” series.
c. In this video clip, a son does not understand why his mom and dad can’t pay for his band trip to the Rose Bowl parade. His dad explains to him through a song that he will have to save money in order to pay for his trip because there are many other items that the family needs to purchase every month.
d. Discussion questions may include:
i. What is the dad trying to explain to his son?
ii. If a person earns a lot of money, will they always be able to purchase an expensive item right away?
iii. Can a person make a lot of money and have no money in savings?
iv. The dad tells his son that if he plans to inherit a $1,000,000 then he does not need to save. Is this realistic for most people?
v. What does the dad suggest the son do to help save money to go on his band trip?
iii. Ask participants to identify an item that they would like to save money to purchase.
1. *Note to educator: If the anticipatory set was completed, participants can use the item they identified in that activity.
What item would you like to save money to purchase?

5. How much money should a person save?
To be considered financially secure and have enough money for emergencies
Recommended Amount
Example
A household that has $2,000 per month of expenses
Should have at least $12,000 in savings
$2,000 x 6 months
At least six months worth of expenses
Slide 5: How much money should a person save?
i. Explain to participants that it is recommended that an individual or family have at least six months’ worth of expenses in savings.
ii. Explain to participants that this is a recommendation and depending on individual needs, the exact amount of money a person needs in savings will vary. For example, someone who is self-employed or someone who has dependents may want to have more money in savings.
iii. Ask participants to identify why they think this amount of savings is recommended.
1. If a person were to lose their current income, they would be able to pay all of their expenses for up to six months or until their income was replaced.
Why would this amount of savings be recommended?

6. How can this amount of savings be reached?
Recommended-
10-20% of net income saved until appropriate amount of savings is reached
Net income –
(take home pay)
Income after taxes have been taken out of a paycheck
. Slide 6: How can this amount of savings be reached?
i. Explain to participants that it is recommended that an individual or family save 10-20% of their net income until the appropriate amount of savings is reached.

7. Where can money be saved?
Piggy Bank
Coffee Can
Depository Institution
Under a Mattress
Jar
Slide 7: Where can money be saved?
i. Ask participants to brainstorm places where money can be saved.
ii. Ask them to identify which of these places is the safest location to save money.
Which is the safest method?
Depository Institution!

8. What is a depository institution?
Depository institution - business that offers financial services to people
What is a name of a depository institution in your community?
Advantages to Saving Money
at a Depository Institution
Slide 8: What is a depository institution?
i. Ask participants to explain what a depository institution is.
ii. Discuss the definition of depository institution.
iii. Ask participants to identify the name of a depository institution in their community.
iv. Explain to participants that when money is saved at a depository institution, it is protected from loss, unlike money saved in other locations.
v. Explain to participants that another benefit to saving money at a depository institution is
that depository institutions offer accounts that earn interest.
Money is insured from loss
Offer accounts that earn interest

9. What is Interest? Interest - price of money
Depository institution accounts may earn money from interest
Interest earned-
calculate a percent of total amount of money in account
Slide 9: What is Interest?
i. Ask participants to define interest.
ii. Discuss the definition of interest and interest rates
This percent is the interest rate

10. What accounts at depository institutions earn interest?
Savings Account
Money Market Deposit Account
Certificate of Deposit
Definition
Characteristics
Holds money not spent on current expenses
Pays a higher interest rate than a savings account
Pays interest on a lump sum of money
Money stored until needed
Interest earning
Minimum deposit often required
Number of monthly withdrawals often limited
Specific time requirements
When time period is complete, money and interest earned can be withdrawn
Higher interest rates for longer time periods
Slide 10: What accounts at depository institutions earn interest?
i. Discuss the definitions and characteristics of savings accounts, money market deposit accounts, and certificate of deposits making sure to explain the difference between each account.

11. Value of money saved in these accounts increases!
Time Value of Money
Value of money saved in these accounts increases!
Time value of money- money paid in future is not equal to money paid today
Slide 11: Time Value of Money
i. Explain to participants that when money is saved in an account that earns interest, the value of the money in that account increases and the owner does not have to do anything.

12. Factors affecting the Time Value of Money
Save for as long as possible!
Amount of Money
Save as much as possible, as often as possible!
Interest
Rate
Save at the highest interest rate possible!
Slide 12: Factors affecting the time value of money
i. Explain to participants how they can take advantage of the time value of money by saving at the highest interest rate possible, saving as much money as possible, and saving for as long as possible.

13. Use the time value of money to your advantage!
$500 saved at 3% interest
Year
Amount of money
account is worth
Initial amount saved
$500.00 1
$515.00 2
$530.45 3
$546.36 4
$562.75 5
$579.64
. Slide 13: $500 saved at 3% interest
i. Show participants the example of the time value of money in the table presented.
Use the time value of money to your advantage!

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

15. How do you choose to save money over spend money?
Pay Yourself First!
A Strategy
Set aside money for saving before spending any money
Save then spend!
Slide 15: How do you choose to save money over spend money?
i. Explain to participants that pay yourself first helps a person create a saving before spending habit.
Creates a habit
Saving is not what is left at end of month
Why?

16. To successfully practice “pay yourself first”…
Set goals!
Goal-
End result of something a person intends to accomplish
Slide 16: To successfully practice “pay yourself first”…
1.4.1 Explain to participants that setting goals, specifically financial goals related to savings, can help a person choose to save money over spend money.
Financial Goal-
Specific objectives to be accomplished through financial planning

17. Why is it important to set financial goals?
Helps identify and focus on items that are most important
Make decisions that help obtain what is most important
Slide 17: Why is it important to set financial goals?
i. Explain to participants that by setting goals a person can determine what is most important
to them and focus on receiving that.
1. In terms of saving money, setting goals helps a person remember the importance of
becoming financially secure.
Such as choosing to save over spend!

18. What is a trade-off to saving money for the future?
What are you willing to give up to obtain the item you want to purchase?
This is a trade-off! Trade-off - giving up one thing for another Every decision you make involves a trade-off!
What is a trade-off to saving money for the future?
Slide 18: What are you willing to give up to obtain the item you want to purchase?
i. Remind participants of the item they identified earlier in the lesson as the item they would
save money to purchase.
ii. Ask participants to determine what they would be willing to give up now (in the present) in order save money to receive that item in the future.
iii. Explain to participants that they identified a trade-off, and discuss the definition of tradeoff.
iv. Explain to participants that an overall trade-off to saving money for the future is spending money in the present.
Being more financially secure in the future by saving money is a trade-off to spending money in the present

19. You identified trade-offs that you would make to obtain the item you want to purchase. Do any of those trade-offs affect your spending?
When considering trade-offs to financial goals Examine spending Adjust spending to reach financial goals
Slide 19: Do any of those trade-offs affect your spending?
i. Ask participants to refer to the trade-offs they identified in slide 18. Do any of these tradeoff
affect spending?
ii. Explain to participants that it is important to also examine spending when considering the
trade-offs to financial goals.

20. Why is it important to examine trade-offs and spending when setting financial goals?
Knowing what is given up to receive benefits from goals
Makes goals easier to accomplish!
. Slide 20: Why is it important to examine trade-offs and spending plans when setting financial goals?
i. Explain to participants that by examining the trade-offs to goals a person will better understand what they are giving up in order to reach that goal. This makes reaching goals more attainable and realistic.

21. Is there a secret to saving money?
Choose saving money for the future over spending money in the present
Slide 21: Is there a secret to saving money?
i. Explain that there is not one method of saving that works for every person, but no matter
what a person must make a decision to save money for the future rather than spend money
in the present.

22. In order to choose saving money over spending money…
“Pay Yourself First”
To successfully practice this strategy…
Set financial goals
Examine trade-offs
. Slide 22: In order to choose saving money over spending money…
i. Review the process of choosing to save money over spending money.
Examine current spending

23. What are the “secrets” to saving money?
Because of the unknown of the future, save money to pay for unexpected events or emergencies
To be considered financially secure, save at least six months worth of expenses
To reach this amount, save 10-20% of net income
Money saved at a depository institution is protected against loss and can earn interest
Slide 23-24: What are the “secrets” to saving money?
i. Ask participants to identify what they have learned about saving money in this lesson.
ii. Review the concepts from the lesson.

24. What are the “secrets” to saving money?
Take advantage of the time value of money
Save as much as possible, for as long as possible, at the highest interest rate possible!
Saving money is accomplished by practicing “pay yourself first” and setting goals
Savings goals become more attainable when trade-offs and spending plans are examined