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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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Why and how to save
There are a number of reasons why you should save money. Having savings can help you be prepared for unexpected expenses, work towards long-term goals, and reduce stress by providing a sense of financial security. To save, it's important to budget and identify areas where you can cut expenses. Automating your savings through direct deposit or apps can help make the process easier, and keeping your savings in a separate account can help you resist the temptation to spend it. Created by Sal Khan.
Want to join the conversation?
- pls how to make your parents give you allowance(6 votes)
- You don't make your parents give you an allowance. If they should provide you one, you receive it with gratitude.(26 votes)
- I work every summer at a family business, and am saving this money what is your take on this?(7 votes)
- I am only 14 and am saving for a car or house when
I am older.(6 votes)
- what is the actual best way to save up if you are a spender(5 votes)
- place what money you have, and what money you receive in the future, into some sort of container or account to which you do not have access. Then you can't spend it.(11 votes)
- are you going to cover inflation in this course? Saving money can be tricky in countries like Turkey, with insane levels of inflation.(6 votes)
- The concept of financial literacy certainly must consider inflation, but the hyper-inflation experienced in places like Turkey (recently) Argentina (repeatedly) and Zimbabwe (perpetually) are very difficult to teach about. Perhaps you should rely on a local Turkish content provider for that kind of instruction.(8 votes)
- I like to spend. I also like to collect stuff. Some things will hold their value and can be fun to collect, so you get your "spending" fix while at the same time you are saving. Think coins, comics, gold, etc. These are items that you can get most of your money back on... or sometimes even make money on.(4 votes)
- If you consider your valuable collections to be your savings (or investment, or retirement account), then they're not just stuff that you bought which has lost their value (like old socks, pizzas and cases of beer). Maybe you're already saving and investing, but just have not considered the stuff you've acquired in those terms.(6 votes)
- I don't have any money I'm A kid(5 votes)
- What are the best ways to invest but also save?(2 votes)
- Save first. Save first. Don't invest until you have enough to take care of yourself in case the investment turns out to be a loser, or in case you suddenly have an accident and need the money fast. Invested money is hard to get right away.(6 votes)
- I will try to save, since today(4 votes)
- Anyone else notice the Scientology texts on Sal's bookshelf?(2 votes)
- Is that Sal's bookshelf? Or is it the "bookshelf background" in the studio where he makes the videos, or perhaps an artificial background generated by some app like Zoom.
If you have information about some connection between Sal and Scientology, please share it.(5 votes)
- how to make your parents give you allowance(2 votes)
- You do not MAKE your parents give you an allowance. If they DO give you one, you receive it with gratitude.(4 votes)
Video transcript
- So I'm guessing that
you already have a sense that saving money is a good idea. It's good for a rainy day. That's why we have an emergency fund. There might be unexpected interruption to your income or
unexpected costs that happen from your car breaking down,
or maybe medical expenses, or you might wanna save for something like retirement or a
down payment on a house. But the next question is how do you actually go
about saving the money? We all know it's sometimes
a little bit more fun to spend money than to save money. And what I do personally,
well, I do a few things. First of all, try to set a budget, and we talk about that
in-depth in other videos. Think about what your
after-tax income is every month and then think about
your needs, your wants, and then how much you save. We've talked about the 50, 30, 20 rule, which is just a rule of thumb. Try to at least save 20% of your money. And the way that you
save 20% is spend no more than 50% on needs, no
more than 30% on wants. Now, obviously, if you
can save more than 20% of your money, even better,
but then how do you do that? One thing is set aside some money. Every paycheck, could be every week, every other week, it could be every month. That's just a little bit harder to access. Maybe your money from
your pay gets deposited into your checking account,
either automatically, or you deposit a check. Well, maybe every month. And there's ways that
you can automate this. You make a transfer from your checking account
to your savings account. Makes it a little bit harder
for that money to be accessed and you will only access that money. You tell yourself, "Self, I will only access that money
in an actual rainy day." The other thing to remind yourself is a little bit every day, or
every week, or every month, can add up to a lot. It might feel like, hey, if I save only a hundred
dollars this week, what's the big deal? Maybe I should just spend it. But remember, if you save
a hundred dollars per week, that's going to amount to
$5,200 over the course of a year which is going to amount to $52,000 over the course of 10 years. And that's before we even think about how you could invest it and even grow it above and beyond that. So even that hundred dollars
a week goes a long, long, long way to building your wealth and obviously protecting
you and your family from those rainy days,
from those emergencies.