SavingsSavings

How can you save?How can you save?

Live within your budget/spending plan.Live within your budget/spending plan.

Pay yourself first.Pay yourself first.

Latte factor: cut back on a few wants for Latte factor: cut back on a few wants for the month, like the bag of M&M’s after the month, like the bag of M&M’s after lunch, the drink from Maverik, the coffee in lunch, the drink from Maverik, the coffee in the morning.the morning.

Savings cont.Savings cont.

The Step-down principle: stepping down in The Step-down principle: stepping down in spending. Example:spending. Example: You have to eat, here are your choices:You have to eat, here are your choices:

Sit down restaurant: $20Sit down restaurant: $20

Fast food: $5Fast food: $5

Prepare food at home $2.50Prepare food at home $2.50 Entertainment choicesEntertainment choices

Concert - $20Concert - $20

Movie - $7.50 or $1.00Movie - $7.50 or $1.00

Borrow a movie or play games or go on a walk – FREE!Borrow a movie or play games or go on a walk – FREE! Clothing ChoicesClothing Choices

Banana Republic or Old Navy??? Banana Republic or Old Navy???

Savings cont.Savings cont.

Save your spare changeSave your spare change

Biggest reason people don’t save:Biggest reason people don’t save: I cannot afford to save moneyI cannot afford to save money Can you really afford not to?Can you really afford not to?

Even if you only save $15 dollars a month, Even if you only save $15 dollars a month, when you retire you will have $180, 911.21when you retire you will have $180, 911.21

Needs vs. WantsNeeds vs. Wants

Before purchasing anything, ask yourself:Before purchasing anything, ask yourself: Did I want it yesterday?Did I want it yesterday? Do I really need it?Do I really need it? Will I use it?Will I use it? Can I really afford it?Can I really afford it? Can I be happy without it?Can I be happy without it?

Types of SavingsTypes of Savings

Statement AccountStatement Account Depositor receives a monthly statement in Depositor receives a monthly statement in

which deposits, withdrawals, and interest are which deposits, withdrawals, and interest are recorded.recorded.

Average interest rate is lower at banks than at Average interest rate is lower at banks than at credit unions.credit unions.

Interests rates are generally low. Interests rates are generally low. Accounts are usually accessible through 24- Accounts are usually accessible through 24-

hour automated teller machines (ATMs).hour automated teller machines (ATMs). Funds are easily accessibleFunds are easily accessible

Types of Savings cont. Types of Savings cont.

Interest-earning checking accountInterest-earning checking account Combines benefits of checking and savingsCombines benefits of checking and savings Depositor earns interest on any unused Depositor earns interest on any unused

money in account. money in account.

Certificate of Deposit (CDs)Certificate of Deposit (CDs)

Bank pays a fixed amount of interest on a Bank pays a fixed amount of interest on a fixed amount of money for a fixed amount fixed amount of money for a fixed amount of time.of time.Benefits:Benefits: No riskNo risk SimpleSimple No feesNo fees Offers higher interest rates than savings Offers higher interest rates than savings

accountaccount

Also known as Time Accounts

CDs cont.CDs cont.

Negatives:Negatives: Restricted access to your moneyRestricted access to your money Withdrawal penalty if cashed before expiration Withdrawal penalty if cashed before expiration

date (penalty might be higher than the interest date (penalty might be higher than the interest earned).earned).

Money Market AccountsMoney Market Accounts

Checking/Savings AccountChecking/Savings Account

Interest is variable based on the balance Interest is variable based on the balance and the current market.and the current market.

Can access your money through an ATM, Can access your money through an ATM, a teller, or by writing up to three checks a teller, or by writing up to three checks per month.per month.

Money Market cont.Money Market cont.

Benefits:Benefits: Immediate access to your moneyImmediate access to your money Rate of return is higher than regular savings Rate of return is higher than regular savings

accountsaccounts

Negatives:Negatives: Usually requires a minimum balance of Usually requires a minimum balance of

$1,000 to $2,500.$1,000 to $2,500. Limited number of checks can be written each Limited number of checks can be written each

month.month.

Choosing a Savings AccountChoosing a Savings Account

Consider the following items:Consider the following items: Interest rate (also called rate of return or Interest rate (also called rate of return or

annual yield)annual yield) Fees, charges, penalties.Fees, charges, penalties.

Usually based on minimum balance requirements, Usually based on minimum balance requirements, or transaction feesor transaction fees

Balance requirementsBalance requirements Balance calculation methodBalance calculation method

Most calculate daily. Some use average of daily Most calculate daily. Some use average of daily balances. balances.

Truth in Savings LawTruth in Savings LawThe Truth in Savings Act (Federal Reserve The Truth in Savings Act (Federal Reserve Regulation)Regulation) Requires financial institutions to disclose the Requires financial institutions to disclose the

following information on savings accounts they following information on savings accounts they plan to offer:plan to offer:

Fees on deposit accountsFees on deposit accountsInterest RateInterest RateOther terms and conditionsOther terms and conditionsAPY (Truth in Savings Act defines year as 365 days APY (Truth in Savings Act defines year as 365 days rather than 360, 366 or some other number, which rather than 360, 366 or some other number, which eliminates confusion caused by the more than 8 million eliminates confusion caused by the more than 8 million variations of interest calculation methods previously variations of interest calculation methods previously used by financial institutions.)used by financial institutions.)