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Financial Literacy
Course: Financial Literacy > Unit 2
Lesson 3: Saving money- Why and how to save
- Why and how should I save money?
- Planned and unplanned expenses
- I am ready to save. What is the next step?
- Saving wisely: emergency fund
- Emergency fund
- Saving wisely
- Saving wisely: planned expenses
- Paying yourself first
- Pay yourself first
- Paying yourself first
- What are different types of savings accounts?
- What is interest and how does it work?
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Saving wisely
Learn about saving money over time by splitting the cost throughout the year.
Pop quiz!
What's easier to come up with - dollar sign, 10 or dollar sign, 520?
Ok, that's an easy one. The answer is obviously dollar sign, 10. But, did you know that saving dollar sign, 10 per week is the same as saving dollar sign, 520 per year? Breaking down savings goals into smaller pieces is a very powerful saving strategy for any type of planned expenses.
What are planned expenses?
Planned expenses are any type of expenses that are predictable and occur on a repeating basis. They can be as frequent as daily, like buying lunch, or yearly, like car registration. Because you know that these expenses are coming, you can prepare for them in advance, and make their impact on your pocket much less noticeable.
For example, let's take the November-December holiday season. Financially, this is one of the most stressful times for most people, as they tend to spend more than at any other time of the year. Luckily, that stress can be greatly lowered by following these tips:
- Figure out what you need to save for: Whether it's a vacation, a new car, or a college education, set a goal so you know how much you need to save. In this example, let's plan on saving for holiday shopping.
- Set an amount and a time frame for your goal: Let's say the holiday season just ended and you have 11 months left before you need to start shopping for gifts again. This year you spent about dollar sign, 550 on gifts for your immediate family. This means you need to start saving dollar sign, 50 each month, or roughly dollar sign, 11 per week.
- Put your money in a separate account: This will help you avoid spending it on other things. There is no limit on how many accounts you can have, so consider having an account for each planned expense. This helps you keep an eye on each account separately, and will give you a better idea how close you are to reaching your goal.
- Make saving automatic: Consider setting up an automatic transfer from your checking account to your savings account each month or week. It is least noticeable if you schedule it on the same day you are getting paid. This way, you won't have to remember to transfer the money yourself.
- Adjust your budget, if needed: If you're having trouble saving enough each month, take a look at your budget and see where you can cut expenses. For example, if you go out to eat twice a week, you could reduce that to once a week and put the extra money into your savings account.
- Be patient: Saving for a big expense can take time, but it's worth it in the end. Stay focused on your goal and resist the temptation to dip into your savings for other things.
Want to join the conversation?
how to you save money(4 votes)
You acquire money, and don't spend it. In that way, savings appear. But, it's not magic. It takes patience and some degree of self-denial.(10 votes)
Forgive me if I'm wrong, but isn't 550/11 supposed to be $50 instead of $55? This is in the "Explain" section of "Set an amount and a time frame for your goal."(7 votes)- Yes. There is an error there. Report this error to the Help center, which you'll find at the bottom of the page.(4 votes)
- this is boring, i hate math(0 votes)
Manuel, my friend. The only math here is simple stuff like addition and subtraction, and for the percentage stuff, you can use a calculator. If you plan to grow up and have to manage some resources, you'll need what you learn here. Otherwise your parents, your girlfriend, or someone else will have to manage your money for you, as if you were a little kid.(26 votes)
David, why do you respond and help people answer their questions even though you don't work at Khan Academy.(0 votes)- I like to help people. I learned that from Mr. Rogers on TV. Do you find it problematic that I like to help people?(18 votes)
that's good i wasn't gonna answer either way(4 votes)
- I'm 9th grade in Korea.So I was born in 2008.Is there any work that I could in my country? Is it okay that I work some place? Cause my mom and dad just want me to study this age.So, I'm not sure that I can start working to make some money.
And usually from what age they have their own money? In us?? And what age do they care about their money?(3 votes)- Joy, relax about money. In the long run, money will fail you. You are 15 years old, so learn what it means to be 15, then 16, 17 and 18. When it is time to move on from your parents' home, either to further education or to the world of work, make that transition gradually, holding onto the support your parents have given you to that point as you find new supportive environments of your own. I wish you the best as you learn and grow.(11 votes)
- Should I start saving at 13? And if so, how can I make money? I want a job but I don't know how to get one...(4 votes)
- Before you start saving (which is a good thing to do), it might be practical to ask "What am I saving FOR?" If you don't have an answer to that, then perhaps go to a second position: "What portion of whatever I receive do I save just for the principle of it?"
A third, and very important question, might also be, "What percentage of what I receive am I sharing with others?"
The idea of getting a job just to have one, or just to start getting some money, is a waste of your energy and abilities. Enjoy being 13. Enjoy friends. Enjoy learning.
Imagine that somehow or other you received $20. What part of that would you share with someone needy (say, by giving it to the united way or some other charity)? What portion of it would you immediately spend on something fun? What portion of it would you put away for something big later on? By answering those three questions, you will have started a good habit.(1 vote)
- What type of account should I put money in if I am trying to save for a planned expense?(3 votes)
- First: Project the date upon which you will need to withdraw the money.
Second: Determine whether you have a large chunk of that money now, or if you are planning to begin with a little, and add to it as time goes on.
Third: Talk to your banker.
Long ago, many banks offered accounts known as Christmas Clubs. People wanting to have money to spend for Christmas gifts in December would start putting money into accounts week by week in January. The accounts were "locked"... The money in them could not be accessed until the next December (of course, in emergencies it could be gotten, but it was a lot of hassle to do so.) When the "time goal" (December) was reached, the money that had accumulated bit by bit for 11 months, plus the interest it had earned, was available to the depositor.
It's possible that this kind of account is no longer available. That's why you should talk to your banker, to learn what IS available.(5 votes)
how do you get a bank account and how old do you need to be to open a account(4 votes)
It depends on the bank, and there are different way to sign up for one.(2 votes)
Jeez, between emergency funds, college funds, holiday funds, taxes, and everything else, how does anyone have any money for anything else?(3 votes)- Once the emergency fund is up to where it needs to be, you don't have to add anything else. Holiday funds depend on whether you're planning to give stuff away: if you aren't, then no need to put anything in them. Taxes are like death, there's no way to avoid them, so you should plan for taxes just like you plan for your funeral expenses. Many people seem to have money for other things, because restaurants and casinos do good business.(3 votes)