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Savings Options. I. Importance of Saving A. To buy…without paying interest.

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Presentation on theme: "Savings Options. I. Importance of Saving A. To buy…without paying interest."— Presentation transcript:

1 Savings Options

2 I. Importance of Saving

3 A. To buy…without paying interest.

4 B. For emergencies: can you pay your deductible?

5 C. For retirement. Because Social Security’s future is uncertain, and it is not enough anyway. (average $1079/month)

6 D. It is not enough to just save, you must make your savings grow. Because what is constantly nibbling away at your savings?

7 INFLATION! And the IRS…

8 Your savings must grow an average of 3% yearly just to keep up with inflation.

9 II. Where to save. Some important considerations...

10 The key to monetary growth: Time

11 Rule #1: Start saving at a young age. Compound interest (interest computed on the sum of an original principal and its interest) and compounding dividends leads to exponential growth So do stock splits. 1>2; 2>4; 4>8, and so on.

12 Rule #2: Before deciding where to put your savings, decide what those savings will be used for. Consider these three things:

13 A. Rate of return: The % by which your principal grows over time. Includes interest rate. Does your rate of return beat inflation???

14 B. Ease of access: Generally, the easier and quicker the asset is to turn into usable cash (liquidity), the lower its return.

15 High liquidity:

16 B. Ease of access: Generally, the easier and quicker the asset is to turn into usable cash (liquidity), the lower its return. High liquidity: Checking account (0%)

17 B. Ease of access: Generally, the easier and quicker the asset is to turn into usable cash (liquidity), the lower its return. High liquidity: Checking account (0%) Low liquidity:

18 B. Ease of access: Generally, the easier and quicker the asset is to turn into usable cash (liquidity), the lower its return. High liquidity: Checking account (0%) Low liquidity: CD (3%)

19 C. Risk: Generally, riskier investments have greater possible returns (and losses).

20 Low risk:

21 C. Risk: Generally, riskier investments have greater possible returns (and losses). Low risk: Savings account (<1%)

22 C. Risk: Generally, riskier investments have greater possible returns (and losses). Low risk: Savings account (<1%) Higher risk:

23 C. Risk: Generally, riskier investments have greater possible returns (and losses). Low risk: Savings account (<1%) Higher risk: Stocks (-100% to +250%)

24 Famous rule #3: Money is like manure. If piled in one place, it ~stinks~. But, when you spread it out, it makes things *grow*.

25 Famous rule #4: PAY YOURSELF FIRST! Invest consistently! Have funds automatically withdrawn each pay period.

26 “Be fearful when others are greedy and be greedy when others are fearful.” -Warren Buffet, 2 nd richest human in America.


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