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P.Y.F. Welcome! Explain why it is important to save P.Y.F. Welcome! Explain why it is important to save

P.Y.F. Welcome! Explain why it is important to save - PowerPoint Presentation

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P.Y.F. Welcome! Explain why it is important to save - PPT Presentation

Determine goals for saving money Identify savings options Determine which savings options will help you reach your savings goals Recognize which investment options are right for you Homework Passport page 40 ID: 740598

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Slide1

P.Y.F.Slide2

HomeworkSlide3

How’s It Going?

Have you increased your savings?

What improvements have you seen in your finances?

Has your credit score improved?

What is the most significant improvement in your finances?

Any new challenges?

Slide4

What Do You Know?

Pre-Test from Participant’s Guide

1. Which of the following is true about the value of saving? Select all that apply

a) Reduces the need for credit in emergencies

b) Helps to achieve your financial goals

c) Helps you manage your expenses better

d)

Improves

your standard of living

2. Annual Percentage Yield (APY) means:

a) The amount of interest you pay on a loan

b) The percentage you will earn on your savings or other deposit account

c) The minimum percent of your income you must save each year to keep your savings account

d) How long you need to keep your money in a savings accountSlide5

What Do You Know?

Pre-Test from Participant’s Guide

3. What is a mutual fund or exchange traded fund (ETF)?

a) A collection of many stocks or bonds

b) An individual stock

c) An individual bond

d) All of the above

4. What are the advantages of traditional retirement accounts

a) The account can never lose value b) The account grows tax free until withdrawal c) The account is insured by the government d) Greater potential growth when compared to a savings account5. What are ways to contribute to your monthly savings and investing. a) Contribute to a workplace account (401(k), 403(b), 457, TSP) b) Contribute to an individual retirement account (IRA) c) Direct deposit into a savings account d) All of the above

AnswersSlide6

What Do You Know?

Pre-Test from Participant’s Guide

Which of the following is true about the value of saving? Select all that apply:

All responses are true. Savings is more than just a nest egg.

a) Reduces the need for credit in emergencies

b) Helps to achieve your financial goals

c) Helps you manage your expenses better

d) Improve your standard of living 2. Annual Percentage Yield (APY) means: b) The percentage you will earn on your savings or other deposit accountAPY is the rate of return you get for your interest bearing accounts that includes the benefit of compounding.

Slide7

What Do You Know?

Pre-Test from Participant’s Guide

3. What is a mutual fund or exchange traded fund (ETF)?

a) A collection of many stocks or bonds

4. What are the advantages of traditional retirement accounts

b) The account grows tax free until withdrawal d) Greater potential growth when compared to a savings account5. What are ways to contribute to your monthly savings and investing. a) Contribute to a workplace account (401(k), 403(b), 457, TSP) b) Contribute to an individual retirement account (IRA) c) Direct deposit into a savings account d) All of the above

Slide8

Let’s Talk About You

Does anyone have a savings technique that works for

you

?

What

type of workplace or individual retirement

plans

are you contributing to?

What techniques do you use to pay yourself first?What types of accounts do you use for savings that you will need in the next few years? Slide9

Pay Yourself First

The Four Types of Savings

Automatic

Savings

Invest

for longer time periodDiversification

Mutual Fund

Exchange

Traded Funds (E.T.F.’s)Retirement accountsTypes of accountsTypes of investmentsWhen to beginHow much do you need Slide10

Managing ExpensesSlide11

The Four Types Savings

Savings for Emergency

3 to 6

months expenses

Reserve for Periodic Expense

Spending Plan Amount

Savings for Goals

My S.M.A.R.T. Goals

Savings for Retirement- InvestingRetirement CalculatorSlide12

Savings: What type of Account?

Savings Account

Pays interest

May require minimum balance

Low opening deposit

Limited number of withdrawals

Money Market Account

Higher interest rates

Higher opening deposit

Higher balance = higher rate

Limited number of withdrawals

Certificate of Deposit / Share Certificate

Money is held for specific length of time (6 months – 5 years)

Longer term = higher rate

Fixed interest rates

May have penalty for early withdrawalSlide13

Annual Percentage Yield (A.P.Y.)

The percentage of interest you will earn on a yearly basis

Includes the effect of compoundingSlide14

Make it Automatic

Prior to Paycheck

Retirement Plan

From Paycheck

Designated savings or money market account

Automatic transfer between accounts

Other sources for your savings account

Tax refund, pay increase

Bonus, spare change Slide15

Emergency savings improves quality of life

Amount in

emergency savings

<$500

>$500

Difficulty paying mortgage or rent

42%

16%

Overdrawn account52%22%

Worried a lot about personal finance53%21%Consumer Federation of America 2008Slide16

Periodic Expenses

Slide17

Saving for Goals

Savings

reduces the

need for credit

Determine cost / time until purchase

As loans are paid

off,

redirect payments to savings

Examples: car, education, house Slide18

Investing: Preparing for Retirement

Social Security alone does not replace your

income

Use Ballpark estimator to determine amount

needed

(

www.choosetosave.org/ballpark)

Employer retirement match = FREE MONEYSlide19

Investing Choices

Mutual Fund

Exchange Traded Fund

(E.T.F.)

Collection of individual

stocks or bonds

Stocks

Ownership

Bonds

LoanSlide20

Highest Risk-

More potential for growth or loss

Lowest Risk-

Less potential for growth or lossSlide21

Saving Compared To Investing

SAVING (Safety)

INVESTING (Growth)

Short

term

–emergencies,

short-term goals

Long term

long-term goals, retirementInsured by FDIC/NCUA

Not insured

No risk of loss

to your contribution

Risk for

loss of some of your contribution

Slow

growth

Potential

higher long term growth

.Slide22

Investing Principle: Diversification

Diversification:

Using a variety of investments to reduce your risk of loss

Ways to diversify:

Multiple Stocks & Bonds

Mutual Funds or Exchange Traded Funds (ETF)

Stock Funds

Bond Funds

Target Retirement Funds Target Date or LifecycleSlide23

Retirement Accounts

Workplace

401(k): For-profit businesses (usually)

403(b): Educational institutions, tax-exempt organizations

457: State and local governments

Thrift Savings Plan (TSP): Federal Employees, military

IndividualIndividual Retirement Account (IRA) Slide24

Retirement accounts:Slide25

How Much Will You Need?

Factors to Consider:

Age

Salary/annual budget

Planned retirement age

Number of years in retirement

Inflation rate

Rate of return on investments etc.

www.choosetosave.org/ballparkor Ballpark Estimate at your App StoreBallpark Estimator ToolSlide26

Time is On Your Side

By starting earlier she ended with $116,325 more

even though she invested $30,000 less

Assumption: 8% ReturnSlide27

Time Value of Money

Age contribution begins:

Assumption: 8% ReturnSlide28

Investment Per Month

to

have $500,000 by age 65.

Start at age

Need to Save Monthly

25

$143

30

$218

35

$335

40

$526

45

$849

50

$1,445

55

$2,733

60

$6,805

Assumption: 8% ReturnSlide29

Reminder: Daily Decisions

One CoffeeSlide30

Pay Yourself First

Prioritize future needs over current expenses and past debt

Four areas of savings

Make it automatic

Investing

How investing differs from savings

Types of investing options

How much to put in retirement

Small decisions make a big difference Slide31

What Have You Learned?

Post-Test from Participant’s Guide

1. What is a major difference between saving and investing?

a) Most savings are federally insured; investment products are not

b) Savings products have a risk of loss and investments don’t

c) Investments don’t have as high a potential for growth as savings

d) Savings and investment products are the same

2. What are ways

to make savings automatic? a) Direct deposit a portion of pay into a separate savings account b) Keep cash under your mattress c) Have a portion of your pay go directly to a retirement account d) Both a) and c) are correctSlide32

3. What are benefits of paying yourself first?

a) Improving your standard of living

b) Learning to manage money better

c) Having money for emergencies

d) All of the above

4.What are ways you can best diversify your retirement investments?

a) Invest in individual stocks

b) Invest in individual bonds

c ) Invest in stock funds, bond funds or exchange traded funds d) Invest in companies that you are familiar with5. Which statement(s) are true about retirement accounts? Select all that apply a) The account can never decrease in value b) The money in the account is taxed every year c) The money in the account is not taxed while it grows d) Over time, the investment is likely to grow more than savings

What Have You Learned?

Post-Test from Participant’s Guide

AnswersSlide33

What Have You Learned?

Post-Test from Participant’s Guide

1. What is a major difference between saving and investing?

a) Most savings are federally insured; investment products are not

Investment products are not insured and you can lose a portion of what you contributed.

2. What are ways

to make savings automatic?

a) Direct deposit a portion of pay into a separate savings account c) Have a portion of your pay go directly to a retirement account d) Both a) and c) are correctDirect deposit and participation in employer retirement plan are great ways to automate savings.Slide34

3. What are benefits of paying yourself first?

All answers are correct.

a) Improving your standard of living

b) Learning to manage money better

c) Having money for emergencies

d) All of the above

4.What are ways you can best diversify your retirement investments?

c ) Invest in stock funds, bond funds or exchange traded fundsFunds are diversified automatically because they are a packaged group of investments. 5. Which statement(s) are true about retirement accounts? Select all that apply c) The money in the account is not taxed while it grows d) Over time, the investment is likely to grow more than savingsRetirement accounts either tax the money at the time of contribution or withdrawal, while it grows, money is not taxed. Investments do tend to have higher rates of return over time, but can lose money in any individual year.

What Have You Learned?

Post-Test from Participant’s GuideSlide35

Homework

(Passport)Slide36

Questions?