Managing Your Cash

Cash Management Cash Management The daily routine of handling money to take care of individual or family needs.

Cash Management Effective cash management includes having available money for: Living expenses; Emergencies; Savings; Investing.

Cash Management Tool Five types of cash management tools: Checking Account Savings Account Money Market Deposit Account Certificate of Deposit Savings Bond

Checking Account Checking Account Features may include: Tool used to transfer funds deposited into an account to make a cash purchase. Checking accounts may be non-interest or interest earning. Features may include: Minimum balance requirements; Charge transaction fees; Limited number of checks written monthly. Reduces the need to carry large amounts of cash.

Savings Account Savings Account Account to hold money not spent on consumption. Have a lower interest rate than other cash management tools

Money Market Deposit Account A combination savings/investment plan in which money is used to purchase safe, liquid, securities minimum balance requirement tiered interest rates- amount of interest earned depends on the account balance For example: a balance of $10,000 will earn a higher interest rate than a balance of $2,500.

Money Market Deposit Account continued limited to three to six transactions each month Features of may include: Minimum amount required to open the account often $1,000 balance falls below a specified amount earn a lower interest rate

Certificate of Deposit (CD) A deposit that earns a fixed interest rate for a specific length of time Interest rates vary depending upon specified time length. The longer the length, the higher the interest rate.

Certificate of Deposit continued Features may include: Range from seven days to eight years in length; Minimum deposits range from $100-$100,000; If funds are withdrawn before the expiration date, penalties are assessed; Different types to fit your needs Standard- fixed Flexible- can add money and withdraw on occasion free of charge

Savings Bonds A registered, non-transferable bond issued and backed by the U.S. Government "the All American Investment" easy way to save money safely get a good market return Rates change every May and November based on either current market rates or inflation.

Savings Bond Can buy from bank, through payroll deductions or from Federal Reserve Two types I Bond- state and local income tax exempt federal income tax can be deferred If cashes in before five years subject to a 3-month earnings penalty earn interest for as long as 30 years

Savings Bonds Series EE Savings Bond Government tracks bond by SS# Earn fixed rate of return Buy for 50% of face value Minimum $50 bond- Max $10,000 per year $50 bond Buy for $25 When mature you receive $50 20 years to maturity Government tracks bond by SS#

Average Interest Earned Cash Management Tools Tool Average Interest Earned Purchase Place Special Features Checking Account 1.5% Commercial Banks, Savings & Loan Associations, Credit Union Can be used in place of cash, funds can be easily accessed Savings Account 2.3% Easily accessed, temporary holding place for funds Money Market Account 2.6% Minimum balance, limited transactions, tiered interest rates Certificate of Deposit 4.0% - 5.4%, depending on the length of deposit Commercial Banks, other institutions which accept deposits for a fixed period Penalties for early withdrawals, no deposits or withdrawals are made after initial investment Savings Bonds 4.0% - 5.4%, depending on the length of bond Commercial Banks, Credit Unions, employer payroll deduction plans Tax advantages, a loan to the federal government

Liquidity Liquidity How quickly and easily an asset can be converted into cash. Investors should: Invest in both liquid and non-liquid tools. Liquid assets are important for emergencies when cash must be quickly accessed. Cash management tools are protected by the U.S. Government against loss.

Liquidity Checking Account Most Liquid Savings Account Money Market Deposit Account Certificate of Deposit Savings Bond Least Liquid

Low Risk These five cash management tools are low risk: Insures the funds so the consumer does not lose money on the investment. However, they have lower interest rates. Causes low returns

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