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Personal Finance Garman/Forgue Ninth Edition

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Presentation on theme: "Personal Finance Garman/Forgue Ninth Edition"— Presentation transcript:

1 Personal Finance Garman/Forgue Ninth Edition
Chapter 5: Managing Checking Savings Accounts PPT slide program prepared by Amy Forgue and Ray Forgue.

2 Learning Objectives List and define the tools of monetary asset management and identify the types of financial services firms that provide those tools. Earn interest and pay no or low fees on your checking accounts. Make the best use of the benefits of savings accounts. Copyright ©Houghton Mifflin Company. All rights reserved.

3 Learning Objectives Explain the importance of placing excess funds in a money market account. Describe electronic money management, including your legal protections. Discuss your personal finances and money management more effectively with loved ones. Copyright ©Houghton Mifflin Company. All rights reserved.

4 Monetary Asset Management
What is monetary asset management? Monetary assets = Cash Copyright ©Houghton Mifflin Company. All rights reserved.

5 Monetary Asset Management
The Three Tools of Monetary Asset Management: Low-cost, interest-earning checking accounts Interest-earning savings accounts Money market accounts Copyright ©Houghton Mifflin Company. All rights reserved.

6 Monetary Asset Management
Who provides monetary asset management services? Financial Services Industry: Companies that provide monetary asset management and other services. Copyright ©Houghton Mifflin Company. All rights reserved.

7 Depository Institutions
Commercial Banks Insured by Bank Insurance Fund (or BIF) of the FDIC Savings Banks (or S&Ls) Insured by Savings Association Insurance Fund (or SAIF) of the FDIC Copyright ©Houghton Mifflin Company. All rights reserved.

8 Depository Institutions
Mutual Savings Banks (or MSB) Credit Union (or CU) Insured by the National Credit Union Share Insurance Fund (or NCUSIF) Copyright ©Houghton Mifflin Company. All rights reserved.

9 Deposit Insurance Deposit Insurance is a real plus.
The maximum insurance on all single-ownership (individual) accounts (held in you name only) is $100,000. The maximum insurance on all joint accounts (accounts held with other individuals) is $100,000. Copyright ©Houghton Mifflin Company. All rights reserved.

10 Deposit Insurance The maximum insurance on all retirement accounts is $200,000. A maximum of $100,000 in insurance per beneficiary is payable on “death accounts”. Copyright ©Houghton Mifflin Company. All rights reserved.

11 Other Financial Service Providers
Mutual Funds Stock Brokerage Firms Insurance Companies Copyright ©Houghton Mifflin Company. All rights reserved.

12 Tool #1: Interest-Earning Checking Accounts
Debit (or Check) Card Copyright ©Houghton Mifflin Company. All rights reserved.

13 Tool #1: Interest-Earning Checking Accounts
Types of checking accounts: Interest-Earning Checking Account [or Negotiable Order of Withdrawal (NOW) Account] Tiered Interest Lifeline Banking Account Copyright ©Houghton Mifflin Company. All rights reserved.

14 When You Write a Check Cleared Substitute Check Stop-Payment Order
Copyright ©Houghton Mifflin Company. All rights reserved.

15 Payment Instruments for Special Needs
Traveler’s Checks Money Orders Certified Check Cashier’s Check Copyright ©Houghton Mifflin Company. All rights reserved.

16 Endorse Your Checks Properly
Bank Endorsement Special Endorsement Restrictive Endorsement Copyright ©Houghton Mifflin Company. All rights reserved.

17 Protect Yourself from Bad Check Fees
Automatic Funds Transfer Agreement Automatic Overdraft Loan Agreement Bounce Protection Agreement Copyright ©Houghton Mifflin Company. All rights reserved.

18 Tool #2: Savings Accounts
Time Deposits Copyright ©Houghton Mifflin Company. All rights reserved.

19 Tool #2: Savings Accounts
Statement Savings Account (or Passbook Savings Account): Permit frequent deposits or withdrawals of funds. Copyright ©Houghton Mifflin Company. All rights reserved.

20 Tool #2: Savings Accounts
Certificate of Deposit (or CD) Variable-Rate Certificates of Deposit (or Adjustable-Rate CDs) Brokered Certificates of Deposit Copyright ©Houghton Mifflin Company. All rights reserved.

21 Tool #2: Savings Accounts
How to save: “Pay Yourself First” Saving is not glamorous; slow and steady wins the race! Emergency fund Other savings goals can be broken down into short-term goals and monthly savings amounts. Copyright ©Houghton Mifflin Company. All rights reserved.

22 Savings Account Interest
Amount of Money on Deposit Method of Determining the Balance Interest Rate Applied Annual Percentage Yield (APY) Copyright ©Houghton Mifflin Company. All rights reserved.

23 Savings Account Interest
Frequency of compounding Grace Period Copyright ©Houghton Mifflin Company. All rights reserved.

24 Tax Consequences of Saving for Children’s College
Put money in a Section 529 college savings plan. Put money in a Coverdell Education Savings Account (ESA). Put money for college in a custodial account. Put money in a Roth IRA. Copyright ©Houghton Mifflin Company. All rights reserved.

25 Tool #3: Money Market Accounts
Super NOW Accounts Money market deposit accounts Money market mutual funds Copyright ©Houghton Mifflin Company. All rights reserved.

26 Asset Management Accounts
Central Asset Account (or AMA) Sweeps Copyright ©Houghton Mifflin Company. All rights reserved.

27 How Ownership of Accounts Is Established
Individual Account Payable at Death Designation Joint Account Copyright ©Houghton Mifflin Company. All rights reserved.

28 How Ownership of Accounts Is Established
Joint Tenancy with Right of Survivorship Tenancy in Common Tenancy by the Entirety Copyright ©Houghton Mifflin Company. All rights reserved.

29 Electronic Money Management
Electronic Funds Transfers (or EFTs) ATM Transaction Fee: Payments levied each time an ATM is used. Copyright ©Houghton Mifflin Company. All rights reserved.

30 Consumer Protection Regulations
Electronic Funds Transfer Act Disclosure Statement Periodic Statements Fixing errors Protection for lost cards Copyright ©Houghton Mifflin Company. All rights reserved.

31 The Psychology of Money Management
Managing money and making financial decisions are different. People ascribe strong emotions to money. Copyright ©Houghton Mifflin Company. All rights reserved.

32 How to Talk About Financial Matters
Get to Know Yourself Focus on Commonalties Learn to Manage Financial Disagreements Use Positive “I” Statements Be Honest and Talk Regularly Copyright ©Houghton Mifflin Company. All rights reserved.

33 How To Develop Money Sense in Children
Give an Allowance Encourage Work Teach Them to Make Good Choices through Increasingly Complex Activities Talk About Family Finances with Children Be a Role Model Copyright ©Houghton Mifflin Company. All rights reserved.

34 Top 3 Financial Missteps in Managing Checking and Savings Accounts
People slip up in building and maintaining good credit when they do the following: Paying high fees unnecessarily. Keeping most of your excess funds in you checking account where it earns you very little interest. Failing to reconcile your accounts on a regular basis. Copyright ©Houghton Mifflin Company. All rights reserved.

35 Good Money Habits in Managing Checking and Savings Accounts
Use a free, interest-earning checking account for your day-to-day spending needs. Use high-interest savings accounts for funds you will not need for six months to about five years in the future. Use investments for needs that will not occur until five or more years in the future. Copyright ©Houghton Mifflin Company. All rights reserved.

36 Good Money Habits in Managing Checking and Savings Accounts
Maintain an emergency fund sufficient to cover three months of expenses. Buy certificates of deposit when saved funds will not be needed until a specific future date. Reconcile your account statements monthly. Copyright ©Houghton Mifflin Company. All rights reserved.

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