Savings Plans and Payment Methods

Types of Savings Plans O To achieve your financial goals, you will need a savings program. O Savings programs include: O Regular savings accounts O Certificates of Deposit O Money Market Accounts O Savings Bonds

Regular Savings Accounts O Traditionally called passbook accounts, are ideal if you plan to make frequent deposits and withdrawals. O Require no minimum balance and allow you to withdraw money on demand. O Low interest earned O Bank may provide monthly or quarterly statements

Certificates of Deposit O A certificate of deposit(CD) is a savings alternative, in which money is left on deposit for a stated period of time to earn a specific rate of return. This period of time is called the term. O The date when the money becomes available to you is called the maturity date. O Relatively low risk way to invest money. O Offers a higher interest rate than a regular savings account with a few trade offs.

Three key limitations to CDs O You may have to leave your money on deposit for one month to five or more years. O You probably will pay a penalty if you take the money out before the maturity date. O Financial institutions require that you deposit a minimum amount to buy a certificate of deposit. This amount is usually larger than the balance a regular savings account requires.

Money Market Accounts O A money market account is a savings account that requires a minimum balance and earns interest that varies from month to month. O The rates float, or go up and down, as market rates change. O Requires a higher minimum balance O Could incur a penalty if your balance goes below the minimum amount O The FDIC insures money market accounts up to $100,000.

U.S. Savings Bonds O Also called a Patriot Bond O Can be purchased from the federal government in amounts that range from $25 to $5,000(face values of $50 to $10,000 respectively) O The government limits total purchases per year to $15,000 per person.

U.S Savings Bonds O The maturity date, or the date a bond reaches its face value, depends on the date it was bought and the interest rate the bond is earning. O Rates could change every six months O Interest earned on Bonds are exempt from state and local taxes O You will pay federal taxes on the interest earnings until you cash in the bond

Evaluating Savings Plans O Rate of Return O The percentage of increase in the value of your savings from earned interest. O Compounding O The process in which interest is earned on both the principal – the original amount you deposited – and on any previously earned interest O May take place every year, every quarter, every month, or even every day

Truth in Savings O According to the Truth in Savings law, financial regulations have to inform you of the following information: O Fees on deposit accounts O Interest Rate O Annual percentage yield(APY) O Terms and conditions of the savings plan O Annual percentage yield(APY) is the amount of interest that a $ deposit would earn, after compounding

Choose wisely O Consider the following factors: O Inflation O Tax Considerations O Liquidity O Safety O Restrictions and Fees