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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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Pennies make dollars

PENNIES

MAKE

DOLLARS


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?


Pennies make dollars

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?


Pennies make dollars

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.



Pennies make dollars

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.


Pennies make dollars

Set up a regular plan

Pay yourself first

Payroll deduction

Save bonus money

Save coupon money

Pay installments to yourself

SAVINGS STRATEGIES


Pennies make dollars

  • Save loose change

  • Break a habit

  • Save lunch money

  • Buy items on sale

  • “Nothing Week”

  • Use a “Crash Budget”

  • Evaluate all spending decisions


Pennies make dollars

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


Pennies make dollars

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


Pennies make dollars

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


Pennies make dollars

Simple Interest = $240

Compound Interest = $240.40

Difference = $.40

Compare Earnings


Pennies make dollars

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 rather than asking where it went !

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)


Pennies make dollars

Year 3 rather than asking where it went !

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


Would you like to have 50 000 or 100 000
Would You Like to Have $50,000 or $100,000? rather than asking where it went !


What to consider when opening a savings account
What to Consider When Opening a Savings Account rather than asking where it went !

  • Yield - APR? Compounding?

  • Liquidity

  • Safety

  • Minimum Deposit

  • Convenience

  • Charges

  • Other Services


The emergency fund
The Emergency Fund rather than asking where it went !

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