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Introduction to Saving

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Introduction to Saving – PowerPoint PPT presentation

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Title: Introduction to Saving


1
Introduction to Saving
2
Saving Basics
  • Savings is the portion of current income not
    spent on consumption.
  • Savings accounts provide an easily accessible
    place for people to store their money to meet
    daily living expenses and to have money for
    emergencies.
  • Financial experts recommend individuals keep a
    minimum of three to six months of salary in a
    savings account.

3
Savings Account Uses
  • Daily Expenses
  • Emergencies
  • Future Purchases
  • Future Investing

4
Saving vs. Investing
  • Saving
  • The portion of current income not spent on
    consumption.
  • Place to store money for daily expenses and for
    emergencies.
  • Liquidity is how quickly and easily an asset can
    be converted into cash. In an emergency, cash
    needs to be easily accessible. Savings accounts
    are more liquid than investment accounts.
  • Generally yield a low interest rate, often
    barely meeting inflation.
  • However, are more secure than investments, in
    that the investor will not lose their principal.

5
Saving vs. Investing cont.
  • Investing
  • The purchase of assets with the goal of
    increasing future income.
  • Develop and implement a savings plan before
    beginning an investment.
  • Investments are not liquid as savings.
  • Rate of return, or annual return on the
    investment, varies, but is usually higher.

6
Reasons People Should Save
  • Emergencies It is recommended individuals have
    a minimum of three to six months of salary in
    savings accounts for emergencies. Examples of
    emergencies can include illness, losing a job, or
    immediate need to replace a large item such as a
    washing machine.
  • Expenses Savings accounts can be used as a
    budgeting tool to manage monthly expenses.
  • Future Purchases Money can be used to meet
    future goals such as a college education, new
    car, down payment on a home, or a new stereo.
  • Investing After an individual has established a
    savings account, money should be invested monthly
    for future income.

7
Why People Dont Save
  • People are not having their current consumption
    needs and wants met.
  • People do not know how much they need to be
    saving or investing for future goals.
  • Money in savings accounts earns such poor
    interest rates. It barely (if at all) keeps up
    with inflation. Investing usually gains higher
    interest rates.
  • Individuals justify not needing money for
    emergencies because they have credit easily
    available.
  • People feel they have adequate insurance and job
    security therefore they do not need money for
    emergencies.

8
Developing a Savings Plan
  • Track spending for one month to determine where
    money is currently going.
  • Evaluate spending and determine where money can
    be saved.
  • Decide what amount will be put into savings per
    month, put decision into writing and stick to
    it!Now you have a Savings Plan.
  •  Be willing to make adjustments. If the savings
    plan is not working evaluate why.

9
Pay Yourself First
  • Put money away into a savings account or
    investment BEFORE you pay other bills or use for
    spending.
  • Consider savings a Fixed Expense

10
70-20-10 Rule
  • Spend 70 of money you earn
  • Save 20 of money you earn
  • Invest 10 of money you earn

11
Conclusion
  • Savings accounts provide an easily accessible
    place for people to store their money.
  • Savings accounts can be used for daily expenses,
    emergencies, future purchases, and future
    investing.
  • It is recommend that individuals keep a minimum
    of three to six months of salary in a savings
    account.
  • Investments generally have a higher rate of
    return but are harder to convert to cash than
    savings.
  • Pay yourself first.
  • Develop a savings plan, write it down, and stick
    to it!
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