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Take Action! Income Tax Financial
Savings accounts are one way of putting money aside for Literacy
The interest you earn on your savings account each the future. Money placed in these accounts is not intended
„ I can put money in a savings year is reported to the government as income. At for everyday expenses. Instead, these accounts provide No. 4
account each month. the end of each year your bank will send you a 1099 a safe place to save money you can use later for major
„ I will start to create my emergency statement showing the amount of interest you’ve purchases such as a car or a home. You should also have
an emergency savings fund you can use when the car
savings fund. earned on your accounts. This must be reported as
income on your income tax return. breaks down, or you suddenly lose your job. Saving money
Long-Term Investing can give you a sense of accomplishment, knowing you are
planning for your future.
A savings account is a good place to put your money for the short term, when accessing the money is The Magic of Interest
more critical than increasing its value. There are better places to put your money if you are saving for When you use someone else’s money, you have to pay for it. The fee for borrowing
your children’s education or your retirement. Accounts designed for education and retirement savings money is called interest. The amount of interest charged is based on a percent of the
can keep your earnings from being taxed, or put off the tax for many years. You can find more details money loaned, or the interest rate. When you put money in a savings account you are
on these accounts in pamphlets F11 and F12 on education and retirement investment. loaning the bank your money to use. They pay you a set interest rate. Suppose you put
Exercise - Your Saving Goals $500 into a savings account that was paying 3% interest each year. The bank says it
will pay part of that 3% each month or .25% per month. (3% divided by 12 months.)
What are you saving for? Identify your savings goals in the chart below. Indicate what you’re saving At the end of the month, the bank would add $1.25 to your account, for a total of
towards, how much you need, and your target date. You can go online and use the Savings Goal $501.25. If you leave the interest in the account, called compounding, it adds to Savings Accounts
Calculator at http://www.bankrate.com/calculators/savings/savings-goal-calculator-tool.aspx to the total saved, or principal. In the next month you earn interest on that as well. So
calculate the amount you need to save each month. .25% of $501.25 is $1.25. Now you have $502.50. Keep this up, and by the end of the
year you’ll have make $15.21 and you didn’t lift a finger! What would happen if you
Amount to Save decided to add just $20 per month to your account? By the end of the year you’d have
I’m Saving for: Amount I Need When I Want It Each Month: $758.
It may not seem like much at the beginning, but the longer you save the more
of an impact compound interest makes. Early savings is the key.

Money Matters

8 Start saving as soon as you can.
Disclaimer:
Learnovation, LLC’s mission is to empower people to 8 70% of consumers live paycheck to paycheck.
improve awareness of their own financial situation.
®
©2017 Learnovation , LLC All Rights Reserved. This information is intended to serve as a general 8 Only 41% of Americans save regularly.
www.learnovation.com guide of financial principles and strategies. It is not 8 Half of American households live on less than $46,326 a year.
intended to address individual financial issues, nor
should it be taken as legal, financial, or other advice.