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saving

Introduction to SAVING

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At WhiteSands Trading & Mentoring (WSTM), our primary goal is to teach you how to trade successfully. However, before you can reach that level, it's essential to build a strong financial foundation. Trading requires capital, and unless you have a windfall from a rich relative or a lottery win, you need to create that capital yourself. This begins with learning how to save.

 

Saving is the first crucial step on your financial journey. By developing good saving habits, you lay the groundwork for investing, which in turn allows you to grow your wealth. As your savings and investments increase, you'll eventually have the disposable income needed to start learning and practicing trading.

 

This section will guide you through the fundamentals of saving, helping you build the financial base required to achieve your trading goals.

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It is important to note that this section is designed specifically for young people who are just beginning their journey towards financial freedom. The examples are created with my own children in mind to help them understand the importance of saving. As we progress to the investing section, the examples will be more suited to young adults. While these initial examples may seem straightforward, the concepts are crucial to understand. Surprisingly, many young adults—and even some older adults—lack a solid grasp of the basics of saving.

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10 Major Concepts of Saving covered in this section

1. Introduction to Saving

  • What is saving?

    • Saving means setting aside money for future needs or goals.

  • Why is saving important?

    • It helps you be prepared for emergencies, achieve goals like buying something special, or plan for bigger things like education or a house.

  • Seven Types of Income

    • Earned Income, Profit Income, Interest Income, Dividend Income, Rental Income, Capital Gains, Royalty Income

 

2. Setting Financial Goals

  • Short-term Vs. long-term goals

    • Short-term goals might be saving for a new phone, while long-term goals could be saving for a car or education.

  • Steps to set financial goals

    • Write down your goals, figure out how much money you need, and set a timeline.

 

3. Understanding Budgeting

  • Creating a budget

    • A budget helps you know how much money comes in and where it’s going.

  • Categorizing income and expenses

    • Organize your money: income/credit (what you earn) and expenses/debit (what you spend).

  • Reducing expenses

    • Look for areas where you can cut back to save more, like skipping that extra snack or coffee.

 

4. Types of Savings

  • Different types of savings accounts

    • Learn about basic savings accounts, high-yield accounts, and Certificates of Deposits (CDs) or Guaranteed Investment Certificates (GICs). Each type helps your money grow differently.

  • Emergency fund

    • Always have a “just in case” fund for unexpected events like car repairs. Experts suggest saving 3-6 months of living expenses.

  • Saving for specific goals

    • Create “savings buckets” for things like education, vacations, or investments.

 

5. Pay Yourself First

  • What does it mean?

    • Before spending on anything else, put money aside for yourself in savings.

  • Automation makes it easy

    • Set up automatic transfers from your paycheck to your savings account, so you don’t even have to think about it.

  • Why start early

    • Developing this habit early helps you build financial security over time.

 

6. Compound Interest & The Rule of 72

  • Simple vs. compound interest

    • Simple interest earns on your initial deposit. Compound interest earns on both your initial deposit and the interest you’ve already earned.

  • How your savings grow

    • The more you save, the more interest you earn, and over time, this grows your savings much faster.

  • Why compound interest is amazing

    • With compound interest, even small amounts can grow into something big if you start early and give it time.

  • The Rule of 72

    • This simple formula helps you estimate how long it will take for your money to double at a give interest rate.

 

7. Tracking and Reviewing Savings

  • Keep track of your savings progress

    • Use a journal, a spreadsheet, or an app to see how your savings are growing.

  • Apps that can help

    • Apps like Mint, YNAB, or your bank’s app can help you stay on top of your budget and savings goals.

  • Review and adjust regularly

    • Check in on your goals every few months to see if you need to make changes based on your progress or new priorities.

 

8. Saving Strategies and Habits

  • Creating a savings plan

    • Figure out how much you can save each week or month, and stick to it.

  • Avoid impulsive spending

    • Give yourself time before making a big purchase to avoid buying thing you don’t really need.

  • Understanding pre-tax vs. post-tax dollars

    • When you buy something for $500, you actually need to make about $1,000 in pre-tax dollars (depending on your tax rate).

 

9. Saving vs. Investing

  • What’s the difference?

    • Saving is setting aside money in a safe place (like a bank), while investing is putting money into something that has the potential to grow, but with some risk (like stocks or ETFs).

  • Why you need both

    • Saving helps you meet short-term needs and goals, while investing helps grow your wealth for the future

 

10. The bigger Picture : Financial Independence

  • How saving leads to financial freedom

    • Regular saving helps you build capital for investments.

  • Long-term financial stability

    • Saving consistently provides a solid foundation to weather tough times and take advantage of opportunities.

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