Savings Options and Choices

Procedures:

1.         Tell students: Write down the first word that you think of when I say the word “saving.”   

            2 or 3 words if it is a small group.

2.         Share and clarify the meanings of the participant responses.

3.         Categorize into the two groups:

             A.        Spending less to preserve income – reduce expenses.

             B.        Setting aside income for later use – achieving future goals.

4.         Explain that there are two ways to look at saving (A and B, above).  One is reactive (A) and one is proactive (B). 

5.         Introduce the “The Decision-Making Process” handout.

             Explain that this decision-making process can be used in a variety of decision-making situations –  any situation when a decision has several different alternatives and criteria.

 6.         Using the handout, ask student to write after line 1, “The Problem or Issue,” the problem or goal that motivates them to save.  Write the goal or problem in a complete sentence.

             After they have written the problem or goal, ask them to rewrite it in different words or from a different perspective.  After they have finished, ask them to rewrite the problem or goal a third time -with different language or perspective.

             Ask students to share the three ways they have described the problem or goal.  In most cases, the second or third version is the one they think more accurately describes the problem.  This illustrates the reason why we may not want to focus on the first thing or way of identifying a problem that comes to mind.

 7.         Ask students to write after line 2, “Decision to be Made,” what they must decide in order to start saving.  What is the real decision to be made? 

           Students share their ideas of the decision.  In most cases, the decision is to give up some consumption now to be able to save for the future goal.  This identifies the opportunity cost of saving as current consumption.   Help students to understand that this is the economic problem they face – are they willing to incur the opportunity cost of saving?

8.         Referring to the handout, line 3, begin a discussion of the options for savings. 

            Focus on the more basic methods or types of accounts.  See the “Teacher Resource: Savings Options” for ideas.  Elicit from the group the basic options for savings accounts

            a.         cash at home

            b.         passbook savings account

            c.         certificates of deposit

            d.         money market account

            e.         money market mutual fund.

            f.          other?

9.         Explain that each of the savings options has advantages and disadvantages.

            Participants should suggest the advantages and disadvantages (criteria).  Guide the discussion to include at least the criteria listed below

            a.         liquidity (time requirements)

            b.         transaction costs (fees, other barriers)

            c.         minimum deposit/withdrawal rules

            d.         interest rate differences

            e.         withdrawal penalties, limits, etc.

            f.          location/technology access

10.       Participants complete the grid with the alternatives and criteria developed by the class.  Rate each alternative + or – according to each criteria.

11.       Small groups discuss their individual ratings – share information and reach consensus about the advantages and disadvantages of each option.