Education Resources

Saving money is an important skill today's youth need to learn. Statistics show that 50 percent of Americans have less than one month of savings for emergency situations. Teachers can contribute greatly to educating students, regardless of their grade level, on the importance of savings.

What is saving versus investing? Saving is storing away a portion of your money safely for short-term needs such as upcoming expenses or emergencies. The savings typically earns a low fixed rate of return. Investing is taking a risk with a portion of your savings and purchasing stocks or bonds in hopes of obtaining a greater return.

Why is it important to save? There are many reasons, including being prepared for emergency situations, planning for large purchases, retirement, safety, security, and growth of funds.

Here are some tips for students on establishing good savings habits:

• Create a budget. A budget serves as a guideline for spending and saving.
• Pay yourself first. Deposit a predetermined amount of money in your savings account first, then proceed with paying your weekly and monthly expenses. If you pay your expenses first—waiting to see what is left over before you put anything into savings—you won't save as much.
• Take advantage of bank technology. If you receive your paycheck by direct deposit into your checking account, consider setting up automatic transfers from your checking to your savings account.

Students can choose from several types of accounts students for saving:

• A traditional savings account generally requires only a low minimum balance, earns interest, and promotes saving by limiting limits the number of withdrawals that the accountholder can make.
• A certificate of deposit (CD) requires a higher minimum balance, has a guaranteed rate of return, and prevents the holder from withdrawing funds on demand for a fixed amount of time—for example, three months, six months, one year—without incurring a penalty.
• A money market account is similar to a checking account that earns interest except that it requires a higher minimum balance, earns a higher interest rate, and limits the amount of checks the accountholder can write.

It's important for students to learn the features and benefits of each type of account as well as to research the products available at various banks in their area so they can make an informed decision regarding their finances.

Keith Astuto of South Miami Senior High School wrote the winning lesson plan for the 2010 Lesson Plan of the Year Contest. In The Bank of Good Habits, a four-lesson unit, students explore many concepts on saving and investing. Lesson 1 addresses the definition of "wealth" using the video Building Wealth. Students learn about the type of financial planners they are by identifying themselves as "planner," "impulsive," "struggler," or "denier." They discuss financial goals, spending, saving, and budgeting and learn about compound interest and the "rule of 72." In Lesson 2, students track their personal expenses, examine types of bank accounts and investments, and learn about the relationship between risk and reward. In Lesson 3, students examine the financial implications of emergency situations by viewing Katrina's Classroom, a DVD with lesson plans about young people who lived through Hurricane Katrina in 2005. In Lesson 4, students participate in an investment simulation and a classroom banking simulation, both of which apply concepts featured throughout the unit. Teachers can continue the banking simulation throughout the school year if they choose.

By Marycela Diaz-Unzalu, economic and financial education specialist, Miami Branch

February 28, 2011