 Saving
and Investing
When you “save” money, you put it into places that offer
little risk: Little risk usually means little interest. Savings can
be put in:
- Money market accounts
- Certificates of Deposits (CDs)
- Savings Bonds
When you “invest” money, you take on more risk—with
the potential to earn more money over the long term. Investments go
up and down in value depending on many things, such as:
- How well the businesses in which you have invested are doing
- The health of the overall economy
- World events
Investments can be made in:
- Individual stocks and bonds
- Mutual funds Individual Development Accounts (IDAs)
Whether you save or you invest, you are taking advantage of the time
value of money. In either case, the amount you save or invest earns
interest. The longer you have your money in savings or investments,
the more you earn.
WORKSHEETS/TIPS—THE TIME
VALUE OF MONEY
A good strategy for savings is to “pay yourself first.”
That means, before you indulge in a “want” instead of
a “need,” put something (even $10 a week) into your savings.
WORKSHEETS/TIPS—TIPS
FOR PAYING YOURSELF FIRST
Emergency Fund
Unexpected problems and opportunities will arise. Family and friends
get sick and need care; cars and appliances break down and need to
be fixed. Money experts say you should set aside at least three months
of living expenses in an emergency fund to cover these unexpected
problems and opportunities.
On a regular basis put part of your income into the emergency fund.
These dollars need to be available at a moment’s notice so don’t
put them into investments that involve risk or take a long time to
liquidate. A separate savings account from your general savings makes
it easier to dip into for emergencies. Saving for an emergency is
better than taking out a loan or cashing in investments; with a loan
you’ll pay interest, with an investment you’ll lose interest.
Use the money only for true emergencies.
WORKSHEETS/TIPS—EMERGENCY
FUND
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