What is Saving Results in Why Save Your present self impacts your future self By saving money today you will have financial security in the future What are examples of emergency expenses ID: 797789
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Slide1
Choose to Save
Advanced Level
Slide2What is Saving?
Results in
Slide3Why Save?
Your present self impacts your future
self
By saving money
today
you will have financial security in the
future
What are examples of emergency expenses?
Slide4Saving Reduces Financial Risk and Uncertainty
Very
liquid
(can quickly and
easily be
converted into cash)
Savings is a monetary asset
Contributes to net worth
What monetary assets do you
have for emergencies?
Slide5How Much Money
S
hould
Be Saved?A
t
least six months worth of expenses in emergency savings
Depends on…
Dependents
Slide6Saving on anIncome & Expense Statement
Saving is a form of unearned income when used to
pay for
an expense
Saving is an expense when money is
being saved
Slide7My Saving QuestPart 1: My Wish List
$
$
$
Brainstorm a personal wish list for yourself
Approximately how much
does each item cost?
Place a star
next to the item you would like to start saving for today
Slide8Identifying Money to Save
What are ways to reduce spending?
Slide9Identifying Money to Save
Do It Yourself
What can you do yourself to save money?
Slide10Create a Savings Plan
Slide11Make Sure Your Goal is Realistic!
Ensure the trade-offs are realistic and opportunity cost of what is given up to save is not too high!
Why can saving be difficult?
Slide12My Saving QuestPart 2: My Current Spending
Identify three changes you will make to your current income
or spending
today
to start saving for the
future
What is the trade-off for each change?
Place a star
next to items with a realistic opportunity cost
Slide13Pay Yourself First
Your present self impacts you future self!
Slide14Saved Money Provides For Your Future Self….
Time Value of Money -
money available at the present time (today) is worth more than the same amount if received in
the future
… and can increase in value!
Slide15What is Interest?
Interest
- the
price of
money
Interest rate
- percentage
rate
used to calculate interest
Compounding interest
– earning interest on interest
Slide16How Do Interest Rates Affect The
Time Value of Money?
Interest
Rate
More Money Earned
$1,000 Saved for 5 Years with Compounding Interest
Slide17Time
More Money Earned
How Does Time Affect the Time Value of Money?
Felix and his parents
Saved for: 18 years
S
tarted when he was born
Contributed: $50/month
Total Contribution: $10,800
Savannah and her parents
Saved for: 4 years
Started when she was a freshman
Contributed: $350/month
Total Contribution: $16,800
Both earned the
same interest rate
Both currently have the
same balance (about $19,500)
Savannah’s parents contributed
significantly more
College Savings Fund
Slide18How Does Money Affect the Time Value of Money?
Principal
- original amount of money saved or invested
Money
More Money Earned
3%
interest for 5 years
Principal
Value of Savings
$100
$115.93
$1,000
$1,159.27
$10,000
$11,592.74
Slide19Year 5
Interest Earned:
$33.26
Amount Investment is Worth:
$140.26
Year 10
Interest Earned:
$56.46
Amount Investment is Worth:
$196.72
Year 15
Interest Earned:
$79.19
Amount Investment is Worth:
$275.90
Year 20
Interest Earned:
$111.07
Amount Investment is Worth:
$386.97
Year 50
Interest Earned:
$845.46
Amount Investment is Worth:
$2945.70
Time Value of Money Magic!
Initial Investment (Principal):
$100.00 at 7% compounding interest
Year 1
Interest Earned:
$7.00
Amount Investment is Worth:
107.00
Slide20Maximize
Y
our Return!
Save for
as long as possible!
Save as
much as possible, as often as possible!
Save
at the highest interest rate possible!
Slide21My Saving QuestPart 3: Implementing My Saving Quest
How will you make the saving process automatic?
How much can you realistically save each week?
How can your goal be reached
using the time value of money?
Slide22Savings is an Essential Component of a Financial Plan