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2Financial Foundation
Goals
Emergency Fund
Budget
Financial Records
Credit Record
Life
Disability
Health
Property Liability
Financial Plan Insurance
Insured Savings, Savings Bonds, Money Market Funds, Certificates of Deposits
Life Insurance Investments Government Securities
High Quality Corporate Stocks, Bonds and Mutual Funds
Real Estate
Aggressive Growth, Junk Bonds, Stocks and Mutual
Funds
Futures Contracts Collectible
s
Pyramid of Investment Risk
Incr
ease
d Ris
k
3
Cash Management
$ Earn maximum interest on funds
$ Maintain adequate funds to manage expenses, emergencies and financial goals
$ Keep cash and credit purchases in line with budget limits
$ Maintain purchasing power by exceeding inflation and taxes
4
Tools of Cash Management
$ Checking accounts
$ Savings accounts
$ Money Market accounts
$ Certificates of deposit and government savings bonds
5
Financial Institutions
Commercial Banks
Credit Unions
Savings and Loan Associations
Mutual Savings Bank
BANK
6
Checking and Savings Accounts Costs and
PenaltiesAutomated teller machine transaction fee
Telephone, computer or teller information
Maintenance fee on minimum-balance account
Maintenance fee on average-balance account
7
Costs and Penalties
“Bounced” check
Delayed use of funds
Inactive account
Excessive withdrawals
Early withdrawal
Check clearing waiting period
Stop-payment order
11
Savings
$ Money set aside from current earnings
$ Money not currently needed
$ Money set aside temporarily
$ Return is usually lower
$ Safe, secure, convenient
12
Investing
Putting what you’ve saved to work to produce a higher return
Money that is set aside to meet longer term goals
Higher risk than savings
13
Reasons Families Save
Emergencies, seasonal expenses, major purchases
Educate self or children
Minimize taxes
Retirement income
Capital accumulationToys
Children’s Education
New Home
Candy
15
Pay Yourself First (A little can add up)
Save this each week At % interest In 10 years, you will have
$ 7.00 5% $ 4,720$14.00 5%
$ 9,440 $21.00 5%$14,160 $28.00 5%
$18,880 $35.00 5%$23,600
16
Savings Options
Savings Accounts
Certificates of Deposit
Money Market Accounts
Government Savings Bonds
Treasury Certificates
17
Low-Risk, Long-Term Savings
$ Certificates of Deposit Fixed or variable
rate
$ U.S. Savings Bonds Series EE Series HH Series I
18
Value of $1 Saved Once
Years
5 10 20 30
1.22 1.48 2.19 3.24
1.34 1.79 3.21 5.75
1.47 2.16 4.66 10.06
1.61 2.59 6.73 17.45
Interest Rate
4%
6%
8%
10%
19
Interest Rate
4%
6%
8%
10%
Years
5 10 20 30
5.42 12.01 29.78 56.08
5.64 13.18 36.79 79.06
5.87 14.49 45.76 113.28
6.11 15.94 57.27 164.49
Value of $1 Saved Yearly
22
Finding $1,000 To Save$ 60 clothing/dry cleaning 60 phone bills 120 groceries 180 entertainment 160 collect coins ($3.20
each week) 360 meals away from
home 60 coffee/sodas
$1,000 SAVINGS
23
Painless Ways To Save
$ Pay yourself first
$ Reinvest interest and dividends
$ Set realistic goals
$ Be yield conscious
$ Keep it simple
$ Keep cash reserves to minimum
$ Use payroll deduction plans
24
Painless Ways To Save
$ Continue to make loan payments into savings after debt has been paid
$ Try a crash savings diet by purchasing only bare necessities
$ Kick a habit and save the money
$ Adjust your tax withholdings and save the difference
$ Save windfall money from lottery, inheritance and gifts
$ Save money from pay raise, bonus or working overtime
$ Start a part-time job and save the money