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Saving Money

Financial Football Module 1
by

Sarah Taylor

on 5 December 2012

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Transcript of Saving Money

Save Money. Start Now. Who saves $$? What do you save for? What do you want to
save for in the future? How long will it take you to meet your goals? What are some ways you can save money? Jars of change
Savings Account
Envelopes for different items
Parents keep it safe
CD- Certificate of Deposit
Checking Account
????? Why save money? Saving money can be one of the best habits you can learn growing up Meet short-term goals
Be ready for the unexpected
Plan for a future goal How much should you save? Experts say to save 10% of your income
Save for emergencies- when you are an adult living on your own, you should save 3-6 months of your earnings Example: If I made $50,000 per year, how much should I have in my savings account after one year? $50,000/52=$962 per week
$962x4=$3848
$3848x3=$11,544 per year
or
$3848x6=$28,088 per year 52 weeks in a year 4 weeks in a month To save for 3 months salary to save for 6 months salary This may seem unrealistic, but good money savings habits can help lead to a good savings Ways to save Pay yourself first In other words: instead of buying things and then seeing if there is any money left over to save, put money aside BEFORE you use it up. Otherwise you may never get around to saving it. Control your spending A simple way to save: Take a look at your spending Spend the afternoon at the park with a sack lunch instead of eating at a fast food restaurant ($6 saved)
Skip the movie: $20 with popcorn & pop, instead rent a movie, $1-$5 ($15-$19 saved) What are some activities you will spend money on this week? What are some less expensive things you could do instead? How much as a class could we save? Thinking about where to save? Coin jars are a good start to saving, but if you're serious about saving money, then the next step is a savings account Vocabulary Principal Withdrawal Deposit Interest Interest rate APR The amount of money you deposit in your account When you take money out of your account When you add money to your account The money the bank pays you for leaving it in your savings account
It is as if you are loaning the bank money (this is how banks make money...from you!) Annual Percentage Rate The percentage amount the bank agrees to give you for leaving your money in their bank How simple interest is calculated: Principal x interest rate x time = interest earned Example:

You open a savings account with a 5% simple APR. What will you earn in interest the first year? $1,000 x .05 x 1 = $50 earned every year Compound Interest When your interest compounds, it gets added back to your account and becomes principal How Compound Interest is calculated: $1,000 x .05 x 1= $50 interest earned in one year


$1,050 x .05 x 1 = $52.50 interest earned in 2 years


$1,102.50 x .05 x 1 = $55.13 interest earned in 3 years To Be Continued... Types of savings and how to choose one 3 basic types of savings:
1. Savings account
2. Checking account
3. CD- certificate of deposit Choosing the right one:
Determine how much access you want to your money
Determine how much you want to deposit (this is called Liquidity)
Find the best interest rate High liquidity means your money can flow freely, like liquid. Example:
If you want to be able to withdrawal money at a moments notice from an ATM, or you need to write several checks a month, you need an account that's very liquid Typically, a traditional savings account or checking account will offer the highest liquidity. Of the two, a savings account will usually offer a higher interest rate However, if you don't need to withdrawal money or write checks, and you have a some money to deposit that can be left alone for a long time, a CD or certificate of deposit is the way to go. The longer you agree to leave the money in, the better the interest rate will be. BUT, if you need to withdrawal money from a CD before the agreed time is up, you will pay a significant penalty fee for doing so. Checking Account Savings Account CD- Certificate of
Deposit More Liquid
Less Money to Save
Lower Interest Rate Less Liquid
More Money to Save
Higher Interest Rate Quick Quiz (use your notes)
Get out a piece of paper
Number your paper 1-5 1. If your pet has a medical condition and you think you may have some surprise Vet visits in the next year, what kind of savings account would you choose to open, why? For the 5 questions choose savings account, checking account, or CD and explain why. 2. If you want to buy a plane ticket for your grandparents wedding anniversary party in Hawaii in 5 years? 3. If you want to buy a bike in a few months? 4. If you have some extra money for an occasional shopping trip? 5. You are saving for college in 5 years? These figures are based on no taxes taken out 1. If your pet has a medical condition and you think you may have some surprise Vet visits in the next year, what kind of savings account would you choose to open, why? 2. If you want to buy a plane ticket for your grandparents wedding anniversary party in Hawaii in 5 years? 3. If you want to buy a bike in a few months? 4. If you have some extra money for an occasional shopping trip? 5. You are saving for college in 5 years? CD Savings Checking
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