Savings tools

2.4.3.G1
Savings Tools
• Standard – Savings and Investing
• Learning Objectives
• Students will be able to
• Explain how savings and investing contribute to
financial well-being, building wealth, and helping
meet personal financial goals.

2.4.3.G1
What’s the Difference Between
Checking & Savings?
You may be tempted to
think you’re all set once you
have a checking account, but
it’s important to have a
savings account, too.

2.4.3.G1
Tips On Opening a Savings Account
Access via smart phone,
make mobile deposits,
link to other accounts
to make transfers.
Bank/Credit
Union/Savings & Loan
Insured – FDIC/FSLIC
$250,000
Few or no FEES!
Minimum balance,
maintenance,
transaction
Compare Interest Rates
– higher rates can add
up

2.4.3.G1
Your Savings Goals
We all know that
saving money is
good for us, but it
can be
challenging to
save regularly.
One of the most
effective ways to
help you save is
to set savings
goals for yourself
and identify ways
to keep yourself
accountable.
Let’s say you have a part-time job and you’re able to save
$100 per month from your paychecks. How would you
distribute the money between your 3 savings goals above?
Short-Term Goals Medium-Term
Goals
Long-Term
Goals
< 3 Months 3 Months – 3 Years > 3 Years

2.4.3.G1
Pay Yourself First
Watch this video to
learn more about the
benefits of making
your savings
automatic.
Which strategy
will help you save
the most money?
What is the benefit of
automating your
savings account
contributions?
What does it
mean to "pay
yourself first"?

2.4.3.G1
© Take Charge Today –August 2013 – Savings Tools– Slide 7
The University of Arizona
Types of Savings Tools
Savings tools - secure and liquid accounts
offered by depository institutions assisting
in the management of a savings fund
Checking
Account
Savings Account
Money Market
Deposit Account
Certificate of
Deposit

2.4.3.G1
3 Things You Need to Know
About an Emergency Fund
As you’ve learned, living paycheck to
paycheck is dangerous, which makes an
emergency fund important. Watch this
video and answer the questions
• Why do you think they recommend
saving 3-6 months of expenses in your
emergency fund?
• Why shouldn’t you keep your emergency
fund money in your checking account?
• Which of these is a good reason to tap
into your emergency fund -- pay your cell
phone bill, buy books for college, pay
$500 deductible after a car accident?
Why?

2.4.3.G1
Ideal for Storing Emergency Savings
Secure
Accounts must
stay within
coverage limits
Liquid
Generally quick
and easy to
withdraw
money
Insured depository institutions offer accounts
which are:
How will a consumer know if their depository
institution offers secure accounts?

2.4.3.G1
It's A Money Thing:
How to Counter the
Effects of Inflation
• What is Inflation?
• What are the three types
of inflation discussed?
• What are its effects on
savings?
Savings
Tools

2.4.3.G1
Savings Tools Characteristics
Interest
Liquidity
Features
Each savings tool has
different characteristics
Goal: Determine the
savings tool most
appropriate for reaching a
financial goal

2.4.3.G1
Checking Account
Definition
• Account that
provides an
easy method
for
withdrawing
and
depositing
money
Interest
• Most do not
• If offered,
rates are low
Liquidity
(accessibility)
• Most liquid
What are common ways to access funds
in a checking account?

2.4.3.G1
Checking Account Features
Reduce the need to
carry large
amounts of cash
Different types of
accounts are
available
(some have fees)
Also known as a
share draft account
at a credit union
Not recommended
as the only account
used to save
money

2.4.3.G1
Savings Account
Definition
• Account
designed to
hold money
not spent on
current
consumption
Interest
• Earns interest
• Rates are
often low
Liquidity
(accessibility)
• More liquid
than other
savings tools
(except
checking
accounts)
What are common ways to access funds
in a savings account?

2.4.3.G1
Five Reasons We Impulse Buy
Loving
Shopping
The Loss
Aversion
Switch
Twisted
Heuristics
(Unconsciously
held rules of
thumb)
The Desire to
Save
Rose-Tinted
Lenses
Pleasure
From Buying
Something
New
“Might I feel
bad if I buy
this and
don’t have
the money
for
something
else?
Packaging up
products as
bulk buys, or
they include
"free" extras.
How much
money we
could save by
buying and
using their
product.
We look to
the future
with an
idealized
view of what
it might be
like
Which reasons people impulse shop apply to you?
Describe an example of a time when you experienced one of these
shopping impulses

2.4.3.G1
Savings Account Features
Effective for storing
emergency funds
May require a
minimum balance or
have a limited number
of withdrawals each
month
Also known as a share
account at a credit
union

2.4.3.G1
Money Market Account
Definition
• Account that
usually has
minimum
balance
requirements
and tiered
interest rates
Interest
• Often tiered
interest rates
– the amount
of interest
earned
depends on
the account
balance
Liquidity
(accessibility)
• Less liquid
than checking
and savings
accounts
because of
minimum
balance
requirements
and
transaction
limits
Which would typically earn a higher interest rate? An
account with a $10,000 balance or a $2,500 balance?

2.4.3.G1
Money Market Account Features
Usually have to deposit a
minimum amount to open
the account (typically
$1,000)
Similar to a savings
account but earns higher
interest and has higher
minimum balance/deposit
requirements

2.4.3.G1
Certificate of Deposit (CD)
Definition
• Account that
is used for a
fixed period
of time and
allows
restricted
access to the
funds
Interest
• Varies
(depending
on time and
amount of
money
deposited)
Liquidity
(accessibility)
• Least liquid
savings tool
Why would a depository institution typically offer higher interest
rates for CD’s with a longer time period or more money invested?

2.4.3.G1
Certificate of Deposit Features
Deposits must be held
for a certain length of
time (usually 7 days to
10 years)
Deposits can range
from $100 to $250,000
If funds are held for
the designated time
period, then there is
limited risk and no fees

2.4.3.G1
Matching Savings Tools to Goals
Amount
of funds
available
Purpose
of
money
saved
When
money
is
needed
Liquidity Interest
Savings
tool
require
ments
Fees
Consider these factors when determining the most
appropriate savings tool for your financial goal

2.4.3.G1
You Decide: Which Tool is Best?
Avery’s goal is to create an
emergency savings fund
Savings account
Funds are easily
accessible
Javier’s goal is to purchase
a new car within the year
Money market account
Higher interest rates
available

2.4.3.G1
Liquidity
Higher interest rates are a trade-off for lower liquidity
Checking
Accounts
Savings
Accounts
Money
Market
Deposit
Accounts
Certificates
of Deposit
Most
Liquid/Lowest
Interest
Least
Liquid/
Highest
Interest
Checking
Account
Savings
Account
Money
Market
Deposit
Account
Certificate
of Deposit

2.4.3.G1
•50% of your income should go to
living expenses and essentials.
•Rent, utilities, and things like
groceries and transportation for
work.
Why is the 50-20-30 rule easy for people to
follow, especially those who are new to
budgeting and saving?
What are the potential risks of having all
three of these buckets belong in the same
category?
Click Here
•20% of your income should go to
financial goals,
•Savings, investments, and debt-
reduction payments (if you have
debt, such as credit card payments).
•30% of your income should be used
for flexible spending.
•Want but don’t necessarily need
(like money spent on movies and
travel).

2.4.3.G1
How Much You Need to Save?

2.4.3.G1
Exit Ticket
When developing a savings plan, why is it important to take
inflation into account?
Give two reasons why it’s vital that you contribute monthly not
only to savings but also to an emergency fund.
How do you distribute your money when using the 50-20-30
rule?

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