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PENNIES MAKE DOLLARS

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PENNIES MAKE DOLLARS. Seven Questions About Your Savings. 1. Do I have 3-6 months living expenses in an emergency fund? 2. Do I save regularly? 3. Am I saving enough for future high cost goals (education, house)? 4. Do I save to purchase big ticket items instead of buying on credit?.

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Presentation Transcript
slide1

PENNIES

MAKE

DOLLARS

slide2

Seven Questions About Your Savings

1. Do I have 3-6 months living expenses in an emergency fund?

2. Do I save regularly?

3. Am I saving enough for future high cost goals (education, house)?

4. Do I save to purchase big ticket items instead of buying on credit?

slide3

Seven Questions About Your Savings continued

5. When I use credit, do I save to make as large a down payment as possible?

6. Do I set aside enough into another account to cover my periodic expenses?

7. Am I saving enough for my retirement?

slide4

The more times you answer“yes”to these questions, the more likely you are a prudent saver.Any“no’s”can help you identify areas where you could do better.

slide6

Savings:

  • putting money aside from present earnings to provide for the future.
why we need to save
WHY WE NEED TO SAVE
  • Everyday Emergencies
  • Loss of Income
  • Retirement
  • Special Family Goals
  • Irregular Expenses
emergency what would you do if this happens
Emergency !!!!What would YOU do if this happens?
  • Karen has a serious dental problem. The dental bill is already $800 with more dental care needed. No dental insurance. No savings. No credit card limit remains.
slide9
Set up a regular plan

Pay yourself first

Payroll deduction

Save bonus money

Save coupon money

Pay installments to yourself

SAVINGS STRATEGIES

slide10
Save loose change
  • Break a habit
  • Save lunch money
  • Buy items on sale
  • “Nothing Week”
  • Use a “Crash Budget”
  • Evaluate all spending decisions
slide11

P. Y. F. Rule

# 1

Pay

Yourself

First

saving weekly at 5 interest
SAVING WEEKLY AT 5% INTEREST

Amount Saved Value After

Per Week 10 Years

$ 7.00 $ 4,720

14.00 9,440

21.00 14,160

28.00 18,880

35.00 23,600

slide13

Break a Habit

Item Frequency Price Savings/year

Soft drink/tea 1/day $1.50 $ 547.50

Beer 1/day $3.00 $1095.00

Magazine 2/month $7.98 $ 191.50

Movie tickets 2/week $22.00 $1141.00

_____________ ________ _______ ________

Total $2978.00

slide14

SAVINGS ACCOUNTS

  • Regular
  • Money Market
  • Certificates of Deposit
  • Saver’s Club
  • Government Savings Bonds
simple interest
SIMPLE INTEREST

Interest = Principle x Rate x Time

= $1,000 x 2% x 1 year

= $20

Principle left in account 2 years

= 2 x $20

= $40

compound interest
COMPOUND INTEREST

First Year

Interest = Principle x Rate x Time

= $1,000 x 2% x 1 year

= $20

Second Year

Interest = (Principle + Interest) x Rate x Time

= ($1,000 + $20) = $1,020 x 2% x 1 year

= $20.40

2 Year Interest Total

$20 + $20.40 = $40.40

slide17
Simple Interest = $240

Compound Interest = $240.40

Difference = $.40

Compare Earnings

slide18

RULE OF 72

72

INTEREST RATE

YEARS TO DOUBLE INVESTMENT

=

OR

72

YEARS TO DOUBLE INVESTMENT

INTEREST RATE REQUIRED

=

simple savings plan
SIMPLE SAVINGS PLAN

Save over $2,000 in 4 years

Year 1

Put $10 per week into a CD, earning 3.5% interest, compounded monthly.

Total in savings account at end of Year..$529.12

Purchase a 3-year Certificate of Deposit (CD)

Year 2

Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account at end of Year..$529.12

Purchase a 2-year Certificate of Deposit (CD)

slide21

Year 3

Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account end of Year 3….$529.12

Purchase a 1-year Certificate of Deposit (CD)

Year 4

Continue to save $10 per week at 3.5% interest, compounded monthly.

Total in savings account end of Year 4….$529.12

Adding It Up

Total in savings account…………..….…$529.12

Value of 3-year CD at end of year 4….... 619.17

Value of 2-year CD at end of year 4….... 584.78

Value of 1-year CD at end of year 4….... 555.68

Total saved/earned in 4 years...$2,288.75

what to consider when opening a savings account
What to Consider When Opening a Savings Account
  • Yield - APR? Compounding?
  • Liquidity
  • Safety
  • Minimum Deposit
  • Convenience
  • Charges
  • Other Services
the emergency fund
The Emergency Fund

to cover3 to 6 months’ living expenses in readily available accounts

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