1. Introduction to Saving

2. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Saving Basics  Savings is the portion of current income not spent on consumption.  Savings accounts provide an easily accessible place for people to store their money to meet daily living expenses and to have money for emergencies.

3. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Savings Account Uses  Daily Expenses  Emergencies  Future Purchases  Future Investing

4. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Why People Don’t Save  People are not having their current consumption needs and wants met.  People do not know how much they need to be saving or investing for future goals.  Money in savings accounts earns such poor interest rates. It barely (if at all) keeps up with inflation. Investing usually gains higher interest rates.  Individuals justify not needing money for emergencies because they have credit easily available.  People feel they have adequate insurance and job security; therefore they do not need money for emergencies.

5. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Saving vs. Investing  Saving The portion of current income not spent on consumption. Place to store money for daily expenses and for emergencies. Generally yield a low interest rate, often barely meeting inflation. Financial experts recommend individuals keep a minimum of three to six months of salary in a savings account.

6. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Saving vs. Investing cont.  Investing The purchase of assets with the goal of increasing future income. Develop and implement a savings plan before beginning an investment. Investments are not liquid as savings. Rate of return, or annual return on the investment, varies, but is usually higher.

7. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Reasons People Should Save  Emergencies – It is recommended individuals have a minimum of three to six months of salary in savings accounts for emergencies. Examples of emergencies can include illness, losing a job, or immediate need to replace a large item such as a washing machine.  Expenses – Savings accounts can be used as a budgeting tool to manage monthly expenses.  Future Purchases – Money can be used to meet future goals such as a college education, new car, down payment on a home, or a new stereo.  Investing – After an individual has established a savings account, money should be invested monthly for future income.

8. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Liquidity  Liquidity is how quickly and easily an asset can be converted into cash. In an emergency, cash needs to be easily accessible. Savings accounts are more liquid than investment accounts.  Savings accounts are more liquid than long term investments because it is easier to immediately access the cash in a savings account than it is to sell an investment assett.

9. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 “Pay Yourself First”  Put money away into a savings account or investment BEFORE you pay other bills or use for spending.

10. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 70-20-10 Rule  Spend 70% of money you earn  Save 20% of money you earn  Invest 10% of money you earn

11. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Developing a Savings Plan  Track spending for one month to determine where money is currently going.  Evaluate spending and determine where money can be saved.  Decide what amount will be put into savings per month, put decision into writing and stick to it!—Now you have a Savings Plan.  Be willing to make adjustments. If the savings plan is not working evaluate why.

12. © Family Economics & Financial Education – Revised November 2004 – Saving Unit – Introduction to Savings Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 1.14.1.G1 Conclusion  Savings accounts provide an easily accessible place for people to store their money.  Savings accounts can be used for daily expenses, emergencies, future purchases, and future investing.  It is recommend that individuals keep a minimum of three to six months of salary in a savings account.  Investments generally have a higher rate of return but are harder to convert to cash than savings.  Pay yourself first.  Develop a savings plan, write it down, and stick to it!