What is a savings plan?

0:01- [Instructor] In this video, we're gonna talk about what it means to save. Now, you might have already been thinking about saving money. Hopefully, you've saved some money in the past. But let's think a little more about what it means. Let's say that you are either earning, or maybe your parents are giving you allowance of $1 a day.

0:22And so, every day, you get a dollar. Let's say that's day one, you get a dollar. Day two, you get another dollar. Day three, you get another dollar. And that just keeps going on every day. Now, there's one world where you don't save, and not saving means as soon as you get that money, you just spend that money.

0:43And so let's say that you just buy, I don't know, a candy bar every day, 'cause you like chocolate. Who doesn't? So, every day, you're getting a little bit of chocolate with that dollar. And that's fine. But the problem is you're never able to buy anything that might be a little bit more expensive that you really, really want.

1:01Maybe there's a toy, or a Lego set, or something else that you've wanted, but it costs a lot. Maybe it costs $20, this toy that you want. I'll just put it in a nice box. There's some toy, or game, that you want, and it costs $20. And you're like, "How am I ever going to pay for that $20?

1:22I'm only getting a dollar at a time." Well, some of you might be thinking the secret is to save. Now, how do I get to that $20? Well, the key is don't spend that dollar every time you get it. Put it away. Put it someplace where you can use it in the future. So let's say you just take this dollar, and you put it into a pile, and that, every day that goes by, that pile is going to grow by a dollar.

1:53You are saving it. And after 20 days, that might not be the best dollar, after 20 days, so let me go all the way to day 20, how many dollars are you going to have? Well, you're gonna have $20 in total. Maybe I'll put the total right over here. Here you have $1 in total.

2:10Here you have $2 in total, 'cause you saved the dollar from that first day. And after 20 days, you're going to have $20. And then you could actually buy that fancier thing, that more expensive thing, that you had a goal. And you might not have realized it, but when you say, "Hey, I'm getting a dollar every day, and I'm gonna save it for 20 days, so I can buy that $20 toy, or game," you are doing, or you are using, or designing, or constructing what you could call a saving plan.

2:38You had a plan. You said, "Hey, I'm just gonna keep putting money away, and if I do that for 20 days, I'm gonna be able to buy that toy." Now, there's other types of saving plans. You might say, "Maybe I'm gonna spend half of this every day and I'm gonna save half of it for the future.

2:52I don't know what I wanna buy, but it'll be nice to have money." So then it would've taken you twice as long to get that toy, but you might've gotten a little bit of chocolate in between. And that's your decision. Now, why is saving important? Well, it might be important to get that game, but, as you grow older, there's going to be bigger and bigger goals that you and/or your parents want to have.

3:13You might want to pay for college, and you might not have enough money coming in right from the get go to pay for college. College is expensive. I would argue more expensive than it should be, but that's just a reality. It's expensive. And so sometimes your parents might be trying to save for college.

3:28You might wanna save for a rainy day. You never know when you might need some money. Parents have to think about these types of things. What if they lose their job? What if there are some bills that come that weren't expected? So the important thing is, when you're getting money, don't always just spend it immediately.

3:45Think about what you really care about, what you want that money, what you want that money for, and what situations might you find yourself in where having a little bit of extra money might be useful. Maybe come up with a plan, and act on it. And then you will be saving.