Chapter 1Savings

The benefits of saving The compounding effectYour personal financial budget

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How to spend winnings?

If you won $5,000 in a lucky draw, how would you spend it ?

Buy things, spend it on enjoyment with family and/or friends, save it?

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“Yue Guang Zu”「月光族」• People who spend their entire salary by the end of each month.• Attitude: enjoy life now; don’t worry about the future; without saving for the future.• Younger generation; avid followers of fashion trends.• Eat well; dress beautifully; do not care how much they spend.

Trendy colloquialisms

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Trendy colloquialisms

“Ken Lao Zu”「啃老族」• Young adults who are not interested in working, living at home and financially dependent on parents.• Young adults who are working, but who spend their salary in advance, due to excessive spending habits; pay none of the family expenses and ask their parents for money.

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Trendy colloquialisms• Do you want to become a “Yue Guang Zu” or “Ken Lao Zu”?

• What can you do to avoid becoming “Yue Guang Zu” or “Ken Lao Zu”?

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The benefits of saving

Reaching your personal goal

• Though money is not everything, it can help you achieve certain personal goals, e.g. travel or study abroad.

Being free and independent• You are able to make more independent financial decisions, as you do not need to ask your parents for extra money.

Wealth accumulation is a journey; the sooner you get started, the better.

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Saving for the future – now or later?

Start early to enjoy the benefit of the compounding effect

Leo starts monthly savings at the age of 20 while Amy starts only at the age of 40. At the age of 65, Leo will save over two million more than Amy!

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Time is money and the compounding effect

Time is money• The earlier you start saving or investing, the faster your money can grow. $

Time

Geometric growth

Compounding effect

• On top of the principal, interest can also earn interest, creating a snow-ball effect.

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Start planning your personal financial budget

Begin with the end in mind. What do you want to achieve in 6 months, 1 to 2 years, and 10 years? Your goals must be specific and realistic, e.g. I want to buy a notebook computer ($5,000) in 1 year’s time. List your goals on a piece of paper and put it in an eye-catching place to remind yourself.

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Personal financial budget Use the “Personal Financial Budgeting Form” to plan your monthly expenses. You may need to reduce or give up some current expenses in order to achieve your financial goals. Don’t be too ambitious or you may let yourself down and give up.

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Needs & Wants

Needs refer to things we need for our survival, e.g. water.

Wants are our desires for things that are nice to have but may not be necessary, e.g. luxury goods.

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Impulse shoppingWith online shopping and auctions become more popular, will impulse shopping become more popular?

Impulse shopping involves buying things we don’t need, thus adding to our expenditure.

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Secrets of success Set a realistic goal.

Be honest and clear in recording expenses.

Review your goals and progress regularly.

Identify your stumbling blocks and deal with them.

Don’t give up.13

Reflection & discussion What is your budget target?

What factors should you consider when working out your personal financial

budget?

What is the mentality of the “Yue Guang Zu” and “Ken Lao Zu”?

How can you be a rational consumer？

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