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Savings Accounts

Savings Accounts. Chapter 30. Today’s Schedule. Yesterday’s Quiz Review Homework Collection No Homework – Enjoy your break Chapter 30 Quiz. Yesterday’s Quiz. Putting off spending money now to get something later is known as Opportunity Cost

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Savings Accounts

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  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

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