1 / 16

Savings Accounts

This chapter discusses various types of savings accounts, including Traditional, Certificates of Deposit (CDs), and Money Market Funds. It highlights the importance of saving for major purchases, emergencies, and retirement, while introducing concepts like opportunity cost and interest types (simple and compound). Key points also include the role of FDIC insurance in protecting bank accounts and the liquidity associated with different savings options. This knowledge empowers individuals to make informed financial decisions and understand potential risks, such as inflation.

wyman
Télécharger la présentation

Savings Accounts

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Savings Accounts Chapter 30

  2. Today’s Schedule • Yesterday’s Quiz Review • Homework Collection • No Homework – Enjoy your break • Chapter 30 • Quiz

  3. Yesterday’s 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

  5. Types of Savings Accounts • Traditional • CD • Certificate of Deposit • Money Market Fund • Money Market Deposit Account

  6. 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

  7. 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

  8. 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

  9. 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

  10. Advantages & Disadvantages • Main advantage – Earning interest • Others • Insurance against loss • Liquidity • Inflation risk • Costs of savings accounts

  11. 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

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

  13. 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

  14. 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

  15. 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)

  16. 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

More Related