Saving & Investing Back »

Written by Carrie Johnson (former SDSU Extension Family Resource Management Specialist).

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Saving | Investing


One of the most important things you can learn in life is how to save money. It is the first step to getting where you want to be. Anyone can do it. You just have to put your mind to it. Once you start, it gets easier and easier and before you know it, you’re on your way to making your dreams a reality.

Five Strategies to Saving

  1. Pay off High-Cost Debt:

    Debt is something, typically money, that is owed or due. Borrowing more money than you can afford is costly in many ways. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example, if you have a $3,000 credit card balance at 19.8%, and you pay the required minimum balance of 2% of the balance or $15, whichever is greater, it will take 39 years to pay off the loan. With accumulating interest, you will pay more than $10,000 in interest charges.

    Too much debt isn’t just expensive. People with lots of debt often say they lack peace of mind. They worry constantly about paying off debts and making ends meets. The stress of these worries affects their family life, work performance, and other areas of their lives. 

    For more information, visit our Debt Management page.

  2. Save for Emergencies

    Saving for emergencies is, and should be, a top priority for everyone. Maintaining an emergency savings account may be the most important difference between those who manage to stay afloat and those who sink into debt. Keeping an amount worth three to six months of your expenses in a savings account can allow you to easily meet unexpected financial challenges such as a car repair, sick child, loss of job, or broken appliance.

    The emergency fund not only provides you with the money to pay for these expenses, it also gives you the “peace of mind” knowing that you can afford a financial emergency. Not having an emergency savings fund is one reason that many individuals borrow too much money at high interest rates.

    This may seem like an impossible task. But, set a goal and start putting a little money away every pay day. If you are trying to save on a tight budget, the America Saves website offers tips and resources on how it can be done.

  3. Participate in a Work-related Retirement Program.

    Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401(k) plan. If they did participate, with a dollar-for-dollar match they would likely receive an annual yield of greater than 100% on their investment.

    Even if your employer doesn’t offer a retirement plan, you can still save for retirement, and get some tax benefits in the process, by putting money in an Individual Retirement Account (IRA).

  4. Save Monthly Through an Automatic Transfer from Checking to Savings.

    These savings will provide funds for emergencies, home purchase, school tuition, or even retirement. Almost all banking institutions will, on request, automatically transfer funds monthly from your checking account to a savings account, U.S. Savings Bond, or stock mutual fund. What you don't see, you will probably not miss. Over time, your deposits will add up. Even small amounts of savings can help you in the future.

  5. Buy a Home and Pay off the Mortgage Before You Retire.

    The largest asset of most middle-income families is their home equity. Once these families have made their last mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed on in emergencies or converted into cash through sale of the home.


  • Needs vs. Wants: One way to spend wisely is to separate needs and wants, spending primarily on needs. A good financial plan including goals will help in determining the difference between wants and needs.
  • Feed Your Family for Less: Shows you ways to stretch your food dollars to last further throughout the month. Use good strategies at home and at the store by planning ahead.
  • Start Smart: Money Management for Teens: Saving money may not be as much fun as spending money, but it’s still important to do.
  • Saving to Build Wealth: By saving to build wealth, you have to set realistic goals and work to accomplish each step before moving on to the next. You may think it is hard to save. But if you set aside even small amounts on a regular basis, in just a short time you can build a cushion for emergencies or other financial goals. 

Useful Websites

  • America Saves: Provides free financial tools, saving tips and resources that can help Americans from every income level take the steps needed to take charge of their finances and manage their money more effectively. It is a national campaign that encourages individuals and families to save money and build personal wealth.
  • It is a national campaign that encourages individuals and families to save money and build personal wealth.
  • 66 Ways to Save Money: For most kinds of purchases, you can get valuable advice and comparisons on the Internet. Some information is biased so before you buy, check things out. 
  • eXtension: Provides a wide variety of Extension research based articles on many topics involving saving money.
  • Explore the collection of financial information from trusted resources. It contains information based on where you are in life – from birth of a child to retirement.
  • Smart About Money: Learn ways to save and invest utilizing goals for retirement, emergency funds, colleges and others. Calculators and tools are available to let you determine how much you need.
  • Federal Trade Commission – Consumer Information: Learn shopping tips that help maintain a financial safety net and spending wisely. Whether you’re shopping for things you buy routinely — or saving for that occasional big ticket item — planning is key.
  • FDIC Consumer News: Simple ways to rev up your savings and how you can meet your goals with automated deposits and investments.


If you are saving money, you are content just to hang onto it. If you are investing money you are seeking to grow your money. Investing is a way to build wealth.

If you are to be successful financially, you need to be able to integrate savings and investing together. You want to be able to save some money and invest some money. Everyone should have some type of savings account that is designated for emergency purposes. Your emergency fund should include enough money to live on for three to six months if you lose your income.

Once you have your emergency fund established, devote some of your income to investing. By investing, you are able to build your wealth over the long-term. You need to develop a portfolio and fill it with several different types of investments.

Time Value of Money

  • Money – the more you have to invest, the more you are likely to earn.
  • Interest – the higher the rate of interest you earn, the more money you are likely to have.
  • Time – the sooner you invest, the more time it has to make new money. 

Investment Types

The most common terms that are related to different types of investments:

  • Bond: Bonds are issued by both companies and government entities (federal, state, and local). When you buy a bond, you lend money to the issuer. The bond represents a legal promise to pay interest for the use of your money (for example, bridges and highways) and to repay the original amount paid for the bond (principal). Bonds are relatively safe, which usually means a lower rate of return. 
  • Stocks: A type of investment that gives you partial ownership of a publicly traded company. If a company does well, its stock increases also. If it does not do well, the stock can decrease. Outside factors can also affect stock so it can be risky. Over time, many do increase in value. Time is the key factor here. Stocks fluctuate in value daily. You are not guaranteed anything upon purchase. Some do not even pay dividends, so only make you money by increasing in value and going up in price, which can or may not happen.
  • Mutual fund: A good way to diversify your investments is through mutual funds. It pools your money with money from other people. Instead of buying a few assets, a professional fund manager purchases many stocks, bonds, and/or other assets. This diversifies your investment. Professional management and diversification are two of the main benefits. The advantage is to invest your money without the time or experience in choosing investments.
  • Money market account: A type of savings account that offers a competitive rate of interest (real rate) in exchange for larger-than-normal deposits.
  • Exchange-Traded Fund (ETF): ETFs are funds – sometimes referred to as baskets or portfolios of securities – that trade like stocks on an exchange. When you purchase an ETF, you are purchasing shares of the overall fund rather than actual shares of the individual underlying investments.
  • Real Estate: An investment may include residential rental property, land, real estate investment trusts (REIT’s) or commercial business. It also has the risk of going up and down in value from what you paid for it.
  • Treasury Securities: These include government bills, notes and bonds. The principal is safe as long as you hold the security to maturity (the time in which the government agrees to pay back the principal). If you sell the security before maturity, there is a risk in losing some of the principal if interest rates have risen since the purchase date.

Ten Keys to Investment Success

  1. Develop a plan and link it to your financial goals.
  2. Diversify by owning different types of assets and securities.
  3. Invest for the long term.
  4. Have realistic expectations. It’s rare to increase return without increasing risk, or vice versa.
  5. Never invest in anything you can’t “sleep on.”
  6. Monitor the performance of your investment portfolio at least annually.
  7. Take full advantage of tax deferred retirement programs.
  8. Avoid buying any investment that claims you can earn a great return for little risk. If an investment looks too good to be true, it probably is.
  9. Take control of your investments. Stay informed. Even if you work with financial professionals, you must be the one ultimately responsible for your decisions.
  10. Don’t invest in something you don’t understand.


  • Investing for Your Future: An 11-part online study course for beginning investors with small dollar amounts to invest at any one time. Action steps are included in each unit so you can apply the learned material to your lives.
  • FINRA Investor Knowledge Quiz: FINRA believes all investors should have access to basic educational information about investing. They have surveyed investors to get an idea of what people know—and what people may not know—about investing.
  • Smart Investing: FINRA believes investor protection begins with education. They help investors build their financial knowledge and provide them with essential tools to better understand the markets and basic principles of saving and investing.

Useful Websites

  • eXtension: Resources from the Cooperative Extension system with many articles on financial security. 
  • MyMoney.Gov: Provides several publications and curriculum ideas to help you get started with your investing.
  • FINRA Investor Education Foundation: Developed these investor education modules to assist grantees and others with the creation of accurate, unbiased investor education materials.
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