1. 2.4.3.G1 Savings Tools Personal Finance

2. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Types of Depository Institutions Two types of depository institutions are: Commercial BankCredit Union For-profit Open to anyone who wants to utilize a depository institution Offer numerous financial services Usually the largest depository institutions Not-for-profit – owned by members Have membership qualifications – members must share a “common bond” Offer many services but usually not as many as a bank Are often able to pay higher interest rates and charge lower fees

3. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How do you choose one depository institution over another? Choose one that meets your goals! Analyze the following factors: Type of depository institution LocationInsurance Services offered Interest rates offered Features offered Fees charged

4. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Depository institutions keep your money safe Offer a safe and secure place to store your money –Security (safes, secure networks, etc.) –Insurance Federal Deposit Insurance Corporation (FDIC) National Credit Union Administration (NCUA) Insures banks and other types of institutions other than credit unions $250,000 per depositor, per insured institution, for each account ownership type Insures credit unions Same as FDIC

5. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Location Can be an important factor when choosing a depository institution Physical location or only online? Multiple locations or just one? Locations all across the U.S. or only in your state or city/town? Do you have transportation to get to a location?

6. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Transaction and Savings Tools Credit Financial Advice Safe-Deposit Box Special Needs Payment Instruments

7. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Features of Depository Institutions Services offered by depository institutions may offer many different features Online banking Mobile banking Debit cards ATMs Contactless payment

8. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Fees Different types of fees may be charged Fees will vary between institutions and within different services at the same institution One of the most important factors to consider when choosing a depository institution Overdraft feeATM fee Minimum balance fee Charged if you withdraw more money from your account than is available Charge for using an ATM that belongs to another depository institution Some accounts have a minimum account balance; fee charged if you go below that balance

9. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Types of Savings Tools Savings tools - secure and liquid accounts offered by depository institutions assisting in the management of a savings fund Checking Account Savings Account Money Market Deposit Account Certificate of Deposit

10. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Matching Savings Tools to Goals Amount of funds available Purpose of money saved When money is needed LiquidityInterest Savings tool require ments Fees Consider these factors when determining the most appropriate savings tool for your financial goal

11. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Year 5 Interest Earned: $33.26 Amount Investment is Worth: $140.26 Year 10 Interest Earned: $56.46 Amount Investment is Worth: $196.72 Year 15 Interest Earned: $79.19 Amount Investment is Worth: $275.90 Year 20 Interest Earned: $111.07 Amount Investment is Worth: $386.97 Year 50 Interest Earned: $845.46 Amount Investment is Worth: $2945.70 Time Value of Money Magic! Initial Investment (Principal): $100.00 at 7% compounding interest Year 1 Interest Earned: $7.00 Amount Investment is Worth: 107.00

12. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Checking Account Definition Account that provides an easy method for withdrawing and depositing money Interest Most do not If offered, rates are low Liquidity (accessibility) Most liquid

13. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Savings Account Definition Account designed to hold money not spent on current consumption Interest Earns interest Rates are often low Liquidity (accessibility) More liquid than other savings tools (except checking accounts)

14. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Money Market Account Definition Account that usually has minimum balance requirements and tiered interest rates Interest Often tiered interest rates – the amount of interest earned depends on the account balance Liquidity (accessibility) Less liquid than checking and savings accounts because of minimum balance requirements and transaction limits

15. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Certificate of Deposit (CD) Definition Account that is used for a fixed period of time and allows restricted access to the funds Interest Varies (depending on time and amount of money deposited) Liquidity (accessibility) Least liquid savings tool

16. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Liquidity Higher interest rates are a trade-off for lower liquidity Most Liquid/Lowest Interest Least Liquid/ Highest Interest Checking Account Savings Account Money Market Deposit Account Certificate of Deposit

17. 2.4.3.G1 © Take Charge Today –August 2013 – Savings Tools– Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Compounding Interest Earning interest on interest Time is of the essence