Savings Accounts

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Savings Accounts

• Chapter 30

2
Todays Schedule

• Yesterdays Quiz Review
• Homework Collection
• No Homework Enjoy your break
• Chapter 30
• Quiz

3
Yesterdays Quiz

• Putting off spending money now to get something
  later is known as Opportunity Cost
• What are the three major reasons to save that
  were discussed in the chapter?
• Major Purchases
• Emergencies
• Retirement
• There are two types of interest. Name one.
• Simple
• Compound
• Extra Credit In what town is La Salle Manor
  located? Plano

4
Pass Up HomeworkGroup Project
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Types of Savings Accounts

• Traditional
• CD
• Certificate of Deposit
• Money Market Fund
• Money Market Deposit Account

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Traditional Savings Account

• Offered by banks, savings loans, savings banks,
  credit unions
• Usually associated with a minimum deposit to open
• Interest rates vary Usually low
• Two types
• Passbook savings account all deposits
  withdrawals recorded in a book kept by depositor
• Statement savings account all activity is sent
  to the person who has the account

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Certificate of Deposit (CD)

• Requires a minimum deposit for a minimum amount
  of time
• Minimum is usually 500
• Length of time could be 30 days, 6 months, 1
  year, 5 years
• Maturity Date Date when money becomes available
• Interest Rate higher than regular savings
• Cannot cash in before maturity lose interest
  and pay a penalty

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Money Market Fund

• Mutual Fund (pool of money)
• Put into a variety of short-term debt (less than
  1 year) by businesses and government
• Loaning money to a business or government to
  invest
• Interest Rates are variable
• Can get money any time
• Usually need at least 1,000
• Can only write a certain amount of checks

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Money Market Deposit Account

• Banks, Savings Loans, Credit Unions
• Very similar to a Money Market Fund
• Major difference Government guarantees money in
  Market Deposit Account

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Advantages Disadvantages

• Main advantage Earning interest
• Others
• Insurance against loss
• Liquidity
• Inflation risk
• Costs of savings accounts

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Insurance Against Loss

• Banks, Savings Loans, Credit Unions have
  insurance
• Federal Deposit Insurance Corporation (FDIC)
• Government Agency that insures bank accounts
• If a bank fails, the FDIC will replace up to
  100,000
• Money Market Firms not insured
• Some Have insurance
• Reward is generally greater
• Like gambling

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Liquidity

• Ability to quickly turn an investment into cash
• Cars Business
• Liquid or not?
• Savings Account
• Liquid or not?
• CD
• Liquid or not?

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Inflation Risk

• Inflation general increase in the cost of goods
  services
• Inflation Risk Risk that the rate of inflation
  will increase more than the rate of interest on
  savings
• Traditional savings usually reflect accordingly
• Main risk is with CDs of a year or more
• Time Value of Money

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Cost of Savings Accounts

• Some charge a penalty fee for early withdrawal or
  account balance below minimum
• Some charge for each deposit or withdrawal
• Money earned in interest is income
• Income is Taxable

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Quiz

• Name two of the four types of savings account
  discussed in this chapter (4 points)
• What does FDIC stand for? (3 points)
• _____ is the risk that the rate of inflation will
  increase more than the rate of interest on
  savings (3 points)
• Extra Credit How much does the handbook cost?
  (1 point)

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Group Work

• Next Assignment
• Event Management (5 points)
• Project how many will be registered at particular
  points leading up to the event date
• Offer contingency (back-up) plans for all areas
  where something can go wrong
• Recruit and manage event volunteers
• Due 12/1/06