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Pennies Make Dollars: 7 Questions About Your Savings

Assess your savings habits by answering 7 key questions. Learn the importance of saving, strategies to build your savings, and the impact of compounding interest. Find out how small changes can lead to big money in the long run.

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Pennies Make Dollars: 7 Questions About Your Savings

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  1. PENNIES MAKE DOLLARS

  2. 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?

  3. 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?

  4. 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.

  5. Small change makes Big Money!!!

  6. Savings: • putting money aside from present earnings to provide for the future.

  7. WHY WE NEED TO SAVE • Everyday Emergencies • Loss of Income • Retirement • Special Family Goals • Irregular Expenses

  8. 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.

  9. Set up a regular plan Pay yourself first Payroll deduction Save bonus money Save coupon money Pay installments to yourself SAVINGS STRATEGIES

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

  11. P. Y. F. Rule # 1 Pay Yourself First

  12. 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

  13. 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

  14. SAVINGS ACCOUNTS • Regular • Money Market • Certificates of Deposit • Saver’s Club • Government Savings Bonds

  15. 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

  16. 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

  17. Simple Interest = $240 Compound Interest = $240.40 Difference = $.40 Compare Earnings

  18. RULE OF 72 72 INTEREST RATE YEARS TO DOUBLE INVESTMENT = OR 72 YEARS TO DOUBLE INVESTMENT INTEREST RATE REQUIRED =

  19. Savings is the process of telling your money where to go - rather than asking where it went !

  20. 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)

  21. 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

  22. Would You Like to Have $50,000 or $100,000?

  23. What to Consider When Opening a Savings Account • Yield - APR? Compounding? • Liquidity • Safety • Minimum Deposit • Convenience • Charges • Other Services

  24. The Emergency Fund to cover3 to 6 months’ living expenses in readily available accounts

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