Financial PuzzleSaving

The Five Foundations:1. Put $500 in an emergency fund 2. Get out of debt3. Pay cash for your car4. Pay cash for college5. Build wealth and give

• Care in high school because you form habits

Chapter 2

• $500 in an emergency fund• As you get older this grows• 3 months to 2 years of your income

• In high school do not have the same expenses as your parents or adults

• This is money available for surprise expenses• Murphy’s law: anything that can go wrong will go wrong

• Debt will be the only way without an emergency fund

• Debt never solves the problem• Grow the fund to 3 -6 months (or even more)• Keep it in the bank, and only use for emergencies• Keep emergency fund separate from spending money

The First Foundation

1. Emergency Fund2. Purchases3. Wealth Building

Why save?

• What emergencies have happened that you need money for, now?

• Appliance went out• Tooth needs work• Car needs work• Prom

• Money Market• Deposit account, relatively high rate of interest,

requires a higher minimum balance to earn interest or avoid monthly fees

Emergencies are going to happen

• Don’t borrow, set up a sinking fund• Sinking Fund: Pool of money set aside to repay bond or

make improvements (i.e. school uses sinking fund money to fill in gaps – signs around the building)

• Pay yourself first!• When you get a paycheck put a set amount or % to the

side for ‘savings’ • Most of you will have direct deposit = direct deposit into

savings instead of checking

2. Purchases

• Discipline is key• Building wealth is a marathon

• Can and will be slow going for a while• Will hit hurdles• Will have to spend and may drop

3. Wealth Building

Where to keep your money safely

Where you can keep your $ at the bank•Safety Deposit Box

• A fireproof metal strongbox (usually in a bank) for storing valuables

•Saving Accounts• A bank account that earns interest

•Checking Accounts• An account where the holder can write checks• Pay less interest than savings accounts, or none at all

Other accounts at the bank

• Certificate of Deposit• Time deposit, which is insured, with a specific, fixed term, and, usually, a fixed interest rate

• At Chase - $1,000 minimum deposit• CD Term – APY: 6 Month = .2% 12 Month = .25% 18 Month = .35% 24 Month = .40% 36 Month = .5%

• Money Market• Deposit account, relatively high rate of interest, requires a higher minimum balance to earn interest or avoid monthly fees

Secure places from the US Treasury

•Treasury Bills• Short-term securities (few days to 1 year)• Sold at a discount from face value

•Treasury Notes• Interest every 6 months, Maturities in 2, 3, 5, 7, & 10 years

•Treasury Bonds• Interest every 6 months, Mature in 30 years

• I Savings Bonds & EE/E Savings Bonds• Earn interest protected / based on interest & market

Precious Metals & Stones•Silver: 32.02 (March 20, 2012)

• $31.63 per ounce (12/8/11)• 1 year +2.88 or 9.68%

•Gold: $1,648.34 (March 20, 2012)• $1,711.20 per ounce (12/8/11)• 1 year +336.50 or 23.89%

Net Worth Example Item Value

Liquid AssetsChecking accounts $2,000Savings accounts $5,000Money Market account $5,000Other Assets (Personal Possessions of value)InvestmentsMutual Funds $10,000Jewelry $6,000Video Games & System $500Car $1,000

Total Assets $29,500Liabilities House $10,000

Total Liabilities $10,000

NET WORTH =(Assets – Liabilities) $19,500

Shop for a bankLook up information about banks

• Be sure to look at adult/college student accounts

•Net Worth & answer the questions• Note: If do not want to show my your Net Worth - Do NOT write down the information • You DO have to answer the questions