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What would you do?

What would you do?. You get a job for a month (31 days). You are offered one of two pay rates: 1.) $100.00 a day 2.) $0.01 on day one that will double everyday ($0.02 on day two, $0.04 on day three. . . ) Which pay would you take? If you picked 1 you made $3,100

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What would you do?

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  1. What would you do? • You get a job for a month (31 days). You are offered one of two pay rates: 1.) $100.00 a day 2.) $0.01 on day one that will double everyday ($0.02 on day two, $0.04 on day three. . . ) • Which pay would you take? • If you picked 1 you made $3,100 • If you picked 2 you made almost 11 million on day 31 and a total of $21,474,836.47

  2. Time Value of Money =

  3. Today’s Targets • Evaluate the effect time has on saved money

  4. Why & How do we Save? • Short Term Goals • Put money in ‘safe’ spot so will be there • Long Term Goals • Make money work for you – Money making more money

  5. First Things First • What is the national saving rate? • 4.8% • What is the difference between Saving and Investing? • Saving: Put money away, sits there • Investing: Put money to work for you, earning more money • Why MUST we invest? • Money loses value (inflation)

  6. Saver A spends his money partying for 8 years, then opens a retirement / tax – deferred account at age 26. Saver A invest $150 a month for 40 years. Contributions = $80,000 Saver B invests $150 a month for 8 years in a retirement / tax deferred account at age 18. Saver B saves nothing for the next 40 years. Contributions = $16,000 Why Now? (at 12%) Who ends with more?

  7. Saver B by $467,000

  8. Book • Another example on page 29 • Explains the math on page 30 and 31

  9. How Does This Work? • Power of Compounding Interest • Money saved + interest earn more money • Remember rule of 72 • Divide 72 by interest = how many years to double • Answer questions on 32

  10. Understand the math • Handout • Complete the table on page 30 3B together to see the difference between simple and compound interest • Complete Handout as a class • Complete Handout as Homework

  11. Remember =

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