1. Introduction to Saving

2. Saving Basics Savings is the portion of current income not spent on consumption. Recommended to have a minimum of 3-6 months salary saved

3. Reasons People Should Save Emergencies –minimum of three to six months of salary –illness – losing a job –replacing a large item such as a washing machine Expenses –money that is paid out for needs and wants Future Purchases –college education – new car –down payment on a home Investing- the purchase of assets with the goal of increasing future income Giving- charity, gifts

4. Why People Don’t Save current consumption needs and wants aren’t met do not know how much they need to be saving Money in savings accounts earns poor interest rates Don’t need emergency money because they have credit easily available Have adequate insurance and job security

5. Saving vs. Investing Saving –Savings accounts are more liquid than investment accounts Liquidity- how quickly and easily an asset can be converted into cash –Generally get a low interest rate, often barely meeting inflation Inflation- steady rise in the general level of prices

6. Interest Interest – the amount of money that is either gained or lost Interest rate – the percentage used annually to calculate the total interest either gained or lost

7. Saving vs. Investing cont. Investing –The purchase of assets with the goal of increasing future income –Investments are not as liquid as savings –Rate of return, or annual return on an investment, including appreciation and dividends or interest usually higher than savings account –Don’t start until saving plan in place

8. “Pay Yourself First” Put money away into a savings account or investment BEFORE you pay other bills or use for spending.

9. 70-20-10 Rule Spend 70% of money you earn Save 20% of money you earn Invest 10% of money you earn

10. Depository Institutions Commercial Bank Credit Union Savings and Loan Association

11. Commercial Bank Commercial Banks –Usually the largest depository institutions –Considered full-service depository institutions because offer a wide variety of services and products Available to a variety of consumers Examples – Wells Fargo, US Bank, Chase Bank

12. Credit Union Credit Unions –Non-profit cooperative depository institution Owned by members who share a common bond Examples – Rocky Mountain Credit Union, Teachers Federal Credit Union

13. Savings and Loan Association (S&Ls) Savings and Loan Association –Focus on providing loans and mortgages Customers must have a savings account with them Examples – American Federal Savings Bank, Pioneer Federal Savings & Loan.

14. Types of Insurance Federal Deposit Insurance Corporation (FDIC) –Federal government agency which protects depository institution accounts –$100,000 basic accounts –$250,000 on retirement accounts National Credit Union Administration (NCUA) –Provides insurance for credit unions

15. Banking Services

16. Common Services Offered Checking account –May or may not be interest bearing Savings account An account in which money is typically deposited to earn interest –Interest bearing

17. Interest Accounts Earning –Stock –Certificate of deposit –Money market account –Savings Bond Bearing –Credit cards –loans

18. Additional Services Which May Be Offered Safe-deposit box –A secured box in a bank to be used for valuable and important personal items Financial counseling –Information and advice is given to customers to help make financial decisions

19. Bank Critic Go to your banks website Look at –Checking account Do you make interest? Is there a way to make interest? Do you pay fees? –Savings account Interest rate? What could you do to raise the interest rate? Fees? Write a summary of your banks benefits and how you could better use your bank to make more money with your money.

20. Cash Management Tools Five types:  Checking Account  Savings Account  Money Market Deposit Account  Certificate of Deposit  Savings Bond

21. Checking Account $ Tool used to transfer funds deposited into an account to make a cash purchase. $ Checking accounts may be non-interest or interest earning. $ Features may include:  Minimum balance requirements;  Charge transaction fees;  Limited number of checks written monthly.  Reduces the need to carry large amounts of cash. Checking Account

22. Savings Account $ Account to hold money not spent on consumption. $ Have a lower interest rate than other cash management tools $ May have minimum balances

23. Money Market Deposit Account $ A combination savings/investment plan in which money is used to purchase safe, liquid, securities $ - EXAMPLES: CD’s, Government Securities  minimum balance requirement  tiered interest rates- amount of interest earned depends on the account balance $ For example: a balance of $10,000 will earn a higher interest rate than a balance of $2,500.

24. Money Market Deposit Account continued $ limited to three to six transactions each month $ Features of may include:  Minimum amount required to open the account  often $1,000  balance falls below a specified amount  earn a lower interest rate

25. Certificate of Deposit (CD) $ Certificate of Deposit (CD)  A deposit that earns a fixed interest rate for a specific length of time  Interest rates vary depending upon specified time length. $ The longer the length, the higher the interest rate.

26. Certificate of Deposit continued $ Features may include:  Range from seven days to eight years in length;  Minimum deposits range from $100-$100,000;  If funds are withdrawn before the expiration date, penalties are assessed;  Different types to fit your needs  Standard- fixed  Flexible- can add money and withdraw on occasion free of charge

27. Savings Bonds A registered, non-transferable bond issued and backed by the U.S. Government "the All American Investment" easy way to save money safely get a good market return Rates change every May and November based on either current market rates or inflation.

28. Savings Bond Can buy from bank, through payroll deductions or from Federal Reserve Two types I Bond- state and local income tax exempt federal income tax can be deferred If cashes in before five years subject to a 3-month earnings penalty earn interest for as long as 30 years

29. Savings Bonds Series EE Savings Bond Earn fixed rate of return Buy for 50% of face value Minimum $50 bond- Max $10,000 per year $50 bond –Buy for $25 –When mature you receive $50 20 years to maturity –Government tracks bond by SS#

30. Liquidity  How quickly and easily an asset can be converted into cash. $ Investors should:  Invest in both liquid and non-liquid tools.  Liquid assets are important for emergencies when cash must be quickly accessed. $ Cash management tools are protected by the U.S. Government against loss. Liquidity

31. Checking AccountMost Liquid Savings Account Money Market Deposit Account Certificate of Deposit Savings BondLeast Liquid

32. Low Risk These five cash management tools are low risk:  Insures the funds so the consumer does not lose money on the investment.  However, they have lower interest rates. $ Causes low returns

33. The End