CreatinganAccount Learningto Budget REVIEW PRESENTED BY GREENPATH Troy Public Library
Two Main Products Offered by Financial Institutions • Transaction Accounts-An account from which payments can be made to a third party • Deposit Accounts-An account that earns interest and usually has some restriction regarding withdrawals
Transaction Accounts Checking • Transactions Accounts • Lifeline checking • Basic checking • Relationship checking • Student/Senior checking • Express checking • Interest-bearing checking • Rewards checking • Deposit Accounts • Basic Savings • Money Market Accounts • Mutual Funds • Certificate of Deposit
Saving and Investing • Savings Accounts • Certificates of Deposit • Money Market Account • Mutual Funds • Bonds • Stocks • Annuities • Real Estate
New Worth Activity
EmergencyFunds PRESENTED BY GREENPATH Troy Public Library
“Why do I need an emergency funds” • Feel more financial secure • Provides ability to deal with financial emergencies and get back to normal quickly • Helps avoid taking on debt with interest charges (credit card) for repairs or emergency purchases
“Why do I need goals and savings” • Savings for short term goals—those you hope to achieve in a year or two • Vacation or travel • Down payment on a house or car • Savings for major purchases you plan to make • Replace a large appliance • Computer or large electronics
Liquidity how easily you can turn an investment or savings into cash
Dena Wise, Ph.D. Professor, Family & Consumer Sciences UT Extension, Knoxville, Tennessee Portions of this presentation were adapted from “Money Crunch,” by Robin Moody, Dena Wise and Ann Berry, FINRA/The University of Tennessee Extension, 2007.
Financing Your Goals Where should I keep my emergency savings and savings forshort term goals? Let’s Explore the Possibilities!
Emergency/Major Purchase Fund • Set aside some extra money in a safe and liquid account to cover emergency expenses and short term financial goals. • Car repairs • Replacing appliance • Covering expenses if you are temporarily without work • Major purchases you plan to make within a year or so
How Much? How Much Should You Keep in the Emergency/Short Term Goals Fund? Don’t keep excessive amounts in the fund because short term savings options have the lowest rate of return.
Short Term Options (for emergency fund and major purchases) • Traditional Bank Savings Accounts • Money Market Accounts • Certificates of Deposit (CDs)
Savings Account • Most liquidity means you can most easily access your money • No penalties for withdrawals and transfers • Lowest return on investment / lowest earned interest rate
Money Market • Similar to a traditional savings account • Minimum deposit required • Limited withdrawals per month • If balance falls below minimum, you will lose the higher interest rate
Certificates of Deposit • Available in 6 month increments up to several years • Often a minimum deposit – but low enough to be affordable • Penalty for cashing in early • Highest short term returns
1-2 months’ savings Savings account Money market account (at bank) 3-6 months’ savings Bank CD Money market mutual fund Treasury bill Where to Keep the Fund
T.N. & C.J.’s Emergency Situations T.N. & C.J.’s Emergency!
Troy Public Library Financing Your Future Dena Wise, Ph.D. Professor, Family & Consumer Sciences UT Extension, Knoxville, Tennessee Portions of this presentation were adapted from “Money Crunch,” by Robin Moody, Dena Wise and Ann Berry, FINRA/The University of Tennessee Extension, 2007.