Why Don t People Save

1. Why Don�t People Save? Lesson 15

2. September 4, 2012 Why Don�t People Save? 2 The Risky Behavior Mystery People usually know what is good for them, but they often act as if they don�t know. Some people: Drive too fast. Fail to take medications. Go surfing! Why would people do things that don�t seem to be in their interest?

3. September 4, 2012 Why Don�t People Save? 3 Lesson 15 Visual 1Why Don�t People Do What They Should Do?

4. September 4, 2012 Why Don�t People Save? 4 Perhaps the answer lies in identifying the costs and benefits. Costs: All the things that have to be given up when a choice is made. Benefits: Gains or favorable outcomes that make people more satisfied when a choice is made.

5. September 4, 2012 Why Don�t People Save? 5 An analogy Saving is like smoking, diet and exercise.

6. September 4, 2012 Why Don�t People Save? 6 What are the benefits of a eating a healthy diet and exercising regularly? Feel better Look better Reduce your risk of heart disease Reduce your risk of cancer Boost your life expectancy

7. September 4, 2012 Why Don�t People Save? 7 Do the benefits of diet and exercise occur now or in the future? Although people may start to feel better right away, most of the benefits occur in the future.

8. September 4, 2012 Why Don�t People Save? 8 If people choose a healthful diet and exercise regularly, are they guaranteed these benefits? No. Some people may still get heart disease or cancer, no matter what they eat or how well they exercise. Also, a person engaged in a diet-and-exercise program could die prematurely from any number of causes other than heart disease or cancer.

9. September 4, 2012 Why Don�t People Save? 9 What are the costs of choosing a healthful diet and exercising regularly? Possibilities include: Giving up food that tastes really good. Paying dues for membership at a fitness club. Spending time on exercise that you could spend in other ways--napping, reading, gardening, watching television, playing video games.

10. September 4, 2012 Why Don�t People Save? 10 Saving Saving is income not spent on consumption or taxes. Most people know that starting to save money at an early age and saving regularly are good habits that lead to financial well being. Yet many people fail to save early and regularly. Why?

11. September 4, 2012 Why Don�t People Save? 11 What are the benefits of saving? Ability to attain your goals for the future. A feeling of security and satisfaction.

12. September 4, 2012 Why Don�t People Save? 12 What are the costs of saving? Things you could obtain now if you weren�t saving.

13. September 4, 2012 Why Don�t People Save? 13 When do the benefits of saving occur? In the future.

14. September 4, 2012 Why Don�t People Save? 14 When do the costs of saving occur? In the present.

15. September 4, 2012 Why Don�t People Save? 15 The Costs and Benefits of Saving The costs of saving are immediate and certain. People have to give up things they could buy now. The benefits of saving occur in the future and are uncertain. Events might prevent people from reaping the benefits of saving.

16. September 4, 2012 Why Don�t People Save? 16 Opportunity Cost and Incentives Considering the opportunity cost of spending might change how people analyze the costs and benefits of saving. Setting goals is an important factor related to saving. Goals act as incentives to save. Interest provides another incentive to save.

17. September 4, 2012 Why Don�t People Save? 17 Opportunity Cost and Incentives What are some things for which you would like to save?

18. September 4, 2012 Why Don�t People Save? 18 Setting Savings Goals

19. September 4, 2012 Why Don�t People Save? 19 Review What is saving? How is failing to save like failing to eat right and exercise? What are incentives to save? What are short-term, medium-term and long-term saving goals?