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HSFPP Weekly Update # 135—Saving Strategies

Message from Bob & Chris : As discussed in Unit 3 of the Student Guide, one of the first steps to good money management is to know where your money goes and to PAY YOURSELF FIRST (PYF). In other words, put away a set portion of your paycheck into a savings account for items you really want to buy, but can’t afford now, or for an emergency. And don’t let teens fool themselves: emergencies happen. It can be as simple as having a flat tire and not enough funds left to pay for that along with the regular bills; or as bad as going to the emergency room because of an injury with a chainsaw and not having the health insurance to pay for it. The first can leave a person short of money for a while and the second can drive a family to bankruptcy.

Many teens already have good savings strategies, but others only think about the next item they want to buy. Peer pressure and advertising could be part of this uncritical consumerism; but, whatever the case, unnecessary spending now leads to less savings for the future. The major focus of Unit 4, on savings and investments, is meeting one’s short- and long-term financial goals. High school, when students are still young and are studying the levels of math necessary to understand the concepts, is the perfect time for them to learn the time value of money, the impact of compound interest and the rules of 72. Teenagers may not realize how easy it is to become a millionaire by investing early and regularly throughout life. And, if they don’t know what they could hope for, they might take what they can now and overconsume.

Kentucky Cooperative Extension Service was one of the first to coordinate teaching the HSFPP to teenagers in their state. At first I used my oldest daughter, then in high school, to see how interesting the program material was. The unit that had the biggest impact on her was the one on savings and investment. As a result of this unit, all three of my daughters began, in their teen years, putting money into IRAs and mutual funds that they selected. Two years ago, my oldest daughter accepted my offer to match her down payment to buy a cooperative apartment, rather than spending the money I would have spent on her future wedding. In just two years, the cooperative has increased in value by 50 percent. She also plans to become a millionaire before age 55. I think this speaks very highly of the HSFPP and the role parents can play in giving children the option either to consume or invest money given to them by parents.

 

What’s New on the Web Site:

The resource list has just been updated, with two new videos on the list that are relevant to this week’s update: “A Penny Saved: How to Grow Money” (directly reinforces Unit 4) and “Stock Market Basics: Learning without Losing” (for those who want to put more focused class time into investments).

Related Updates:

Update #116 - Saving and Investing - 7 February 2005
Update #108 - Start Saving Now! - 29 November 2004

Website Pick of the Week :

http://www.kiplinger.com/personalfinance/basics/

Kiplinger’s Personal Finance provides a good Web page for students to learn about various savings and investment strategies.

Activity for Educators :

Have your teens read this week’s article In the New$... and then have a discussion using the questions that follow. For another activity, have teens go to http://www.kiplinger.com/personalfinance/basics/, read one of the articles under the tutorial section, and write a short summary about what they learned.

In the New$... More Saving Strategies

“Set up a routine to smooth out your finances, keep from overspending and boost your savings.

“This week's column is the second of two in which I'm offering tips for new college grads and other twentysomethings on how to get a handle on your spending and save more money (read part one).

“My expert tipster is Lynne Koplitz, a young woman who does stand-up comedy for a living but whose finances are no laughing matter. The showbiz life can be feast or famine, so Koplitz has perfected a financial routine to smooth out her erratic income and keep from overspending.

“For example, Koplitz sets aside money for each category in her budget, from manicures to entertainment. She jots down her actual expenses in a notebook and tallies them at the end of each week to see if she's over or under her estimates. She builds in more than she needs to have a cushion -- and when she comes in under budget, she treats herself to a reward.

“Tracking your spending might sound like work, but you don't have to do it forever; even a month will do. Nor do you have to record every penny. An easy alternative is to use your monthly credit- and debit-card statements to see where your money goes. Then you can plug the one or two areas where you're leaking cash, and probably come up with an extra $20 or more per week in savings. That's $1,000 a year -- and a grand is real money.

“Other tricks to add to your own savings repertoire:

• “Start an automatic savings or investment plan with a bank, mutual fund or your company's retirement plan so that money is taken right off the top of your salary, before you even see it.

• “Have your paycheck deposited directly to savings rather than to your checking account. You can transfer money to pay your bills, but you'll think twice about withdrawing additional cash.

• “Limit yourself to just one ATM withdrawal a week.

• “Subtract credit-card purchases immediately from your checking account so you're not surprised when the bill arrives.

• “When you pay off a loan or credit-card balance, add the amount to payments you're making to the next lender on your list, or send the money to a savings or investment account earmarked for a vacation, a car or a house.

• “If you tend to misplace credit-card or ATM receipts, get a couple of storage bins into which you can toss the receipts. That simple step will help you get organized.”

Source: “More Saving Strategies,” by Janet Bodnar. Kiplinger’s Personal Finance. September 1, 2005. http://www.kiplinger.com/personalfinance/columns/drt/archive/2005/dt050901.html

Discussion Questions :

1.) What strategies do you have for saving money?

 

2.) Where could you cut back on your spending to save more money?

 

3.) Why should you start investing some of your money?

 

4.) What goals do you have for the future? Will the goals take money to attain?

 

Activity for Students :

Go to http://www.kiplinger.com/personalfinance/basics/ and read either “Build a Strong Stock Portfolio” or “Growing a Fund Portfolio.” These two articles are listed under “Tutorials” in the gray block on the right side of the page. Write a short, 5-7 sentence summary about what you learned from the articles.

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of this Web site is to assist county extension agents, credit union educators, and high school teachers in improving the economic well-being of our constituency, beginning with today’s students; and also, to assist teachers in Kentucky in meeting KERA’s goal that all students become technologically literate. Weekly Updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators.