Introduction to Saving Family Economics & Financial Education Take Charge of Your Finances

1. Introduction to SavingFamily Economics & Financial EducationTake Charge of Your Finances

2. Saving Basics • Savings is theportion 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. • Financial experts recommend individuals keep a minimum of three to six months of salary in a savings account.

3. Savings Account Uses • Daily Expenses • Emergencies • Future Purchases • Future Investing

4. Saving vs. Investing • Saving • Theportion of current income not spent on consumption. • Place to store money for daily expenses and for emergencies. • 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. • Generally yield a low interest rate, often barely meeting inflation.

5. Saving vs. Investing cont. • Investing • The purchase of assets with thegoal 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.

6. 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.

7. 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.

8. 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 your 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.

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

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

11. Conclusion • Savings accountsprovide 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!