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Money IN/Money OUTINSTRUCTORS' GUIDE |
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Session Three: Saving Means More Money IN
Goal: To challenge participants to spend less in order to save money regularly
Learner Objectives
Participants will be able to:
- Understand that limiting debt is a way to stop money going "out," in order to increase savings
- Understand the principle of "pay yourself first"
- Compare interest rates on savings accounts
- Recognize ways to make savings possible
- Set realistic savings goals
Materials Needed
- 3-a Show Me the Money handouts (2 per person)
- 3-b Minimum Due = Maximum
Damage and Dilemma: Pay Back or
Savings?
(transparency or handouts) - 3-c What Can $10 a Month Do? handouts
- 3-d 6 Steps to Six-Figure Savings brochures (http://www.consumerfed.org/cfaprime.pdf)
- 3-e Confidential Memo handouts
- Overhead projector, if using transparencies
- Pens or pencils
1. Getting Started.
See the Instructions for the Show Me the Money activity (3-a) at the end of this guide (following item 8). Explain that saving money is similar to this game. It can be frustrating and even seem impossible. But there are "secrets" that can make it easier!
2. First Things First...the debt load.
At the last session your challenge was to do a credit inventory and analyze your debt load. If your debt load is higher than the recommendations, the best action to take is to reduce your debt load. Once you have improved your debt picture, convert those monthly debt payments to savings! (Confirm the procedure and schedule for using PowerPay if it is available, allowing participants to enter data and receive a printout of the Analysis Summary -- a combination of the input data and the Debt Repayment Schedule.)Take a look at the examples in Minimum Due = Maximum Damage and Dilemma: Pay Back or Savings? (3-b) It is easy to see how credit dramatically impacts your capability to save!
If your debt load is at an acceptable level, you are ready to put saving secrets to work! Even if you aren't ready to begin a savings program now, you will be able to use these secrets later.
3. The Secrets of Saving.
For additional information on saving, see NCCES publication "Why and How to Save Money" at http://www.ces.ncsu.edu/depts/fcs/frm/docs/fcs450.html.PAY YOURSELF FIRST. Consider saving for your future needs and wants a necessity, just like rent and utilities. Decide on an amount that you can comfortably put away each month before you spend money on any other need or want and then do so.
Many people believe that authorizing a draft from their earnings, directly deposited in a savings account at a bank or credit union, is the best way to do this. The money is never in their hands or checking account to spend. Sure, you could go to the bank and withdraw it, but it isn't as easy to spend this way.
BE INFORMED. What types of saving s accounts are available and what are the current interest rates? There are differences! Distribute a copy of the handout What Can $10 a Month Do? (3-c) Point out the difference in value after 5 years at the different rates. To earn the highest amount of interest possible, you will need to invest your savings in a money market account or a certificate of deposit that may require a minimum starting balance for a higher rate.
BE PATIENT AND CONSISTENT. Explain the bottom section of the handout. Even though a small monthly amount seems insignificant, it adds up through the years. By leaving money in a savings account, your money draws interest. That interest is added to the amount you deposit so that you begin to earn interest on interest-this is called compound interest. It can be very beneficial over a period of years. Explain the advantage of saving a small amount over a long period of time versus saving a lot over a shorter period of time (bottom of 3-c).
THINK SAVE, RATHER THAN SPEND. When you get a pay increase, get a refund, receive money as a gift, win money, find money, or inherit money-save part or all of it!
4. How much can you save?
Start with whatever amount you can. A rule of thumb is to try to save 10% of your take home pay. If you can save more, great! If you can't save that much, do your best to save consistently, whatever the amount. When you get a wage increase, raise your savings as well. Distribute 6 Steps to Six Figure Savings (3-d).
5. How much is enough?
To answer this question, explain that there are different types of savings, with different purposes:- To meet expenses that you pay infrequently, such as car insurance. Some people call these kinds of savings "set- asides."
- To meet unpredictable expenses such as accidents, repairs, rent increases, or higher than average electric or water bills. These may also be a part of "set-asides."
- To meet living expenses for two to six months in case you lose your job or have an illness and miss work.
- To be able to invest and to earn additional money from you investments for long-term goals--retirement, home ownership, or starting a business.
If you aren't already doing so, try to begin saving for the first three purposes. Once you have saved enough to meet the first three purposes, you can begin to save money for investments. You will need additional information and guidance to reach those goals.
6. Summarize today's session:
- Reduce your debt load to a desirable level.
- Pay yourself first, regularly.
- Know current interest rates and what types of savings accounts are available.
- Think about the reasons for saving, a realistic amount of savings, and specific savings goals for your family.
7. Challenges.
Continue keeping records of spending and use of credit. Consider personal goals for saving part of each paycheck and reducing the amount of debt.Distribute copies of the Confidential Memo. (3-e) Ask participants to record their increased savings and debt reduction goals on the memo and bring the completed memo back to the final session. At that session, you will provide each participant two envelopes and two blank copies of 3-e, asking them to make two additional copies of the memo and then to seal a copy of the memo in each envelope. (They will keep one copy of the Confidential Memo to to remind them of their goals.) They will self-address and seal the two envelopes to themselves so one else will see the memos. You will collect the envelopes and mail one back to the participants in six months and the other in twelve months. (Both envelopes will contain a survey and a return envelope, and the twelve-month envelope will also have a blank net worth form to be filled in and KEPT by participants. All information on the surveys will be confidential.)
8. Preview.
You have the basic information to take control of your finances. (NOTE: The next session may be the final one, or you may present the recommended six sessions. Prepare participants for the appropriate session.)
If the next session will be the end of the series: Next time
we will look at how to get
organized, what to keep, making a plan, and how to get additional
information.
If there will be six sessions in the series: Next time we
will see how to tell if you are improving your money situation
and getting where you want to be.
Show Me the Money!
Instructions
| 1 | 3 | 5 | 2 | 4 | 6 | 13 | 15 | 17 | 14 | 16 | 18 |
|---|---|---|---|---|---|---|
| 25 | 27 | 29 | 26 | 28 | 30 | |
| 37 | 39 | 41 | 38 | 40 | 42 | |
| 49 | 51 | 53 | 50 | 52 | 54 |
| 7 | 9 | 11 | 8 | 10 | 12 | |
|---|---|---|---|---|---|---|
| 19 | 21 | 23 | 20 | 22 | 24 | |
| 31 | 33 | 35 | 32 | 34 | 36 | |
| 43 | 45 | 47 | 44 | 46 | 48 | |
| 55 | 57 | 59 | 56 | 58 | 60 |
Make two copies of Show Me the Money for each person. Distribute one copy, face down, to each of the participants. Explain that there are dollar amounts from $1 to $60 scattered on the page, and that they are to find the amounts, in sequence, and circle each amount as they find it -- beginning with $1. That is, circle $1, then $2, then $3, etc. Give no further instructions, but tell them they have one minute to see how far they can go. After the minute has passed, ask the group how many reached $10, $15, $20. Find out the highest number reached. Most participants will find this exercise frustrating.
Now explain the secret: Tell them to fold the paper in half across the asterisks, and then fold it vertically (with six columns on each side) - so that creases will separate the four quadrants of the page. The numbers are arranged in a pattern. The numbers 1-6 alternate from left to right on the top half of the page. Numbers 7-12 then alternate from left to right on the bottom half of the page. Return to the top of the page for numbers 13-18 (left, right, left, right, etc.). Then return to the bottom half for 19-24. There is a rhythm in searching and it is much easier to find the numbers when you know the quadrant in which each is located.
Distribute a second copy of the sheet and again allow one minute to find the numbers in order. Most people will improve, finding several more numbers than the first time. It is not unusual, however, for a few people to do worse--they get too hung up on figuring out the pattern. But the feelings of frustration should be far less for everyone!
Other Resources
- Department of Family & Consumer Sciences e
- Family Resource Management
- North Carolina Cooperative Extension Service
Return to Money IN/Money OUT Home Page
This page (http://www.ces.ncsu.edu/plymouth/mimo/session3Net.html) was created by Jan Lloyd (Extension Area Specialist, Family & Consumer Sciences), Michele Simpson(Program Assistant, Family & Consumer Sciences), and Bruce A. Emmons(Area Specialized Agent, Information Management).
Date Created April 17, 2000.
Last revised on June 27, 2001.
Published by North Carolina Cooperative Extension Service
Distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. Employment and program opportunities are offered to all people regardless of race, color, national origin, sex, age, or disability. North Carolina State University at Raleigh, North Carolina A&T State University, U.S. Department of Agriculture, and local governments cooperating.