Lecture: Build a Savings Habit

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Do curso por University of Illinois at Urbana-Champaign

Financial Planning for Young Adults

92 ratings

University of Illinois at Urbana-Champaign

Financial Planning for Young Adults

92 ratings

Financial Planning for Young Adults (FPYA), developed in partnership with the CFP Board, is designed to provide an introduction to basic financial planning concepts for young adults. The FPYA course is organized across eight separate modules within a 4-week window. Topics covered include financial goal setting, saving and investing, budgeting, financial risk, borrowing and credit. Because financial planning is such a personal topic, you will be encouraged to define your own financial goals and objectives while we discuss concepts and provide tools which can be applied in helping you reach those goals. Within each module, you will view a combination of traditional lecture style videos along with video vignettes that introduce financial topics for discussion among participants. The video vignettes provide a unique and exciting component to this course. Each vignette introduces a real-world scenario where financial decisions must be made and financial planning concepts can be applied. You will be challenged to think critically about each scenario and decide how you might come to a resolution if ever faced with a similar situation. Finally, the course also includes material throughout which is focused on career opportunities in financial planning, including video interviews with actual CFP® professionals and other professionals working in this exciting and growing career area. The final module in the class is devoted to the topic of financial planning as a career.

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Module 3: Saving Strategies

In this module you'll have the opportunity to explore best practices for building a saving habit and discuss barriers to saving. Mental accounting will be introduced and considered in terms of how it can affect saving behavior.

Street Interview: Do You Set Aside Money for Emergencies?1:36

Lecture: Why Save Money?8:25

Lecture: How to Start Saving Money10:30

Vignette: Set a Savings Goal2:57

Lecture: Build a Savings Habit5:57

Street Interview: What Are Some Barriers to Saving Money?1:53

Lecture: Barriers to Saving8:16

Conheça os instrutores

Nicholas Paulson
Associate Professor
Department of Agricultural and Consumer Economics
Kathryn L. Sweedler
Consumer Economics Educator
University of Illinois Extension
Charles R. Chaffin
Director of Academic Programs and Initiatives
Certified Financial Planner Board of Standards

[MUSIC]

Hi, let's talk a little more about building that savings habit and

how you can make that a part of your life.

If you remember the last time we were visiting, that we were talking about

the importance of starting to save now and that it's okay to start small and

save small amounts but as long as we make it regular.

Remember we were talking about putting money into a piggy bank and

what would happen if we put one penny in a piggy bank the first day and

two pennies the second day and three pennies the third day and on.

Just how much would you have at the end of a year if you continued that trend?

I've asked you to write it down to make an estimate.

Let's see how close you were.

The answer is that you would have 667 dollars and 95 cents.

Did you guess that right amount?

Were you over or under?

To me, I'm always surprised that it would add up so quickly in a year.

But that, again, is just an example of how starting small but

starting regularly can make a difference.

The other thing we know from research is that when people start small,

whether you use this penny example or some other mode of getting yourself motivated

that having money building up is motivating in itself.

In overtime, people sort of automatically increase the amount their saving and so

that's why I'm not worried if you start small.

That's fine, just get started.

The other thing that we know from research

is that the way people can save effectively is to put it on automatic.

We want to make it happen regularly and that means you want to set it up.

You don't have to make a decision about every time you need to save money.

For example, a lot of US employers will allow employees to set up

a system where from their paycheck, each paycheck whether its every two weeks or

every month, a certain amount will go directly into their savings account or

into a retirement savings plan rather than going

being deposited into somebody's checking account.

What we see from research is that people who have this type of a system set up

that their accounts grow more than people who have to make that decision every

paycheck whether or not to save money and if you think about it, it makes sense.

If when you get your paycheck you have to sit there and think, do I want to

do something today with the money or shall I save it for a future event?

Most of us are wired so that we're going to go ahead and use that money now.

The immediacy is going to drive us.

So putting it on automatic will let you really work towards those more long

term goals and get that money saved up.

Let's take a look at this with a different amount.

What if you could save $20 per week?

Interesting enough, when surveys are done, most of people say that, yeah,

they could save $20 a week even if they're not doing it right now.

And if we did put $20 a week into an account that was earning 5% return,

in ten years, we'd have almost $14,000.

And if you were saving for

something long term like retirement, you would have almost one 132,000.

Now remember, compounding returns make a difference and

the amount of the compounding return, the rate, makes a difference.

So if we look at somebody who had, instead of 5%,

10% as you can see in this table, the money really adds up.

And so over 40 years, again,

over a half a million dollars if you were putting away just $20 per week.

To me that's motivation.

That's having my money grow and have it work for

me to reach my goal of someday retiring and not being working everyday.

So, we've been talking a lot about saving for

goals, thinking about what your dreams are.

Now is the time to make that plan to really set your goal.

And if you think back to one of our first modules, we talked about setting goals,

we talked about smart goals where they are specific, they're measurable,

they're agreed upon with anybody else that you need to work towards that goal,

that it's realistic and it has a time, it has a deadline.

I challenge you now to think about what are your goals and

what are your savings goals and to write one of those goals.

because as we know when you sit down and you write a goal, you're much more likely

to achieve it than if it's just a vague idea out there that someday I want to take

that trip around the world or someday, I want to buy a new car or buy a home.

So, sit down and think about what is your goal, write a smart goal.

There's another way that you can really keep yourself motivated and

that is to think about joining a group called America Saves.

America Saves is a national campaign who's focus is on helping people save money.

You can go to their website at www.americasaves.org and

you can write in your saving's goal there.

Once you've done, that you will have access to some really excellent resources

that they offer, plus you'll get a quarterly newsletter that will keep you

motivated and help you work towards your goal.

There's no cost for this and there's really no obligation,

you don't have to do this for this course but there's some resources out

there that's available to you that I thought you might like to know about.

So here we are.

You've got some ideas now about how you can start saving, you have

some ideas about what you might want to say for, the next step is up to you.

[MUSIC]

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