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

2. Introduction
Monetary assets = Cash and low-risk, near-cash items that can quickly be converted into cash.
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3. Your Next Five Years In the next five years :
1. Use a free, interest-earning checking account for your day-to-day spending needs.
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4. Your Next Five Years
2. Start now to build an emergency fund sufficient to cover three months of living expenses.
3. Use a pay-yourself-first approach as you begin to build other savings through high-interest accounts.
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5. Your Next Five Years
4. Use investment vehicles for wants that will not occur until five or more years in the future.
5. Use all your checking and savings accounts appropriately by never overdrawing the accounts and by reconciling them monthly.
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6. Learning Objective #1
Identify the tools of monetary asset management and the types of financial services firms that provide those tools.
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7. Monetary Asset Management
Monetary asset management encompasses how you handle all of your monetary assets, including cash on hand, checking accounts, savings accounts and certificates of deposit,
and money market accounts.
The goals are liquidity and safety with maximized earnings
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8. Monetary Asset Management
The Three Tools of Monetary Asset Management:
Low-cost, interest-earning checking accounts
Interest-earning savings accounts
Money market accounts
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9. Figure 5.1: Three Tools of Monetary Asset Management
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10. Who provides monetary asset management services?
Financial Services Industry: Companies that provide monetary asset management and other services.
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11. 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
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12. Depository Institutions
Mutual Savings Banks (or MSB)
Insured by the FDIC’s BIF
Credit Union (or CU)
Insured by the National Credit Union Share Insurance Fund (or NCUSIF)
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13. Deposit Insurance Deposit Insurance is a real plus.
The maximum insurance on all single-ownership (individual) accounts (held in your name only) is $250,000.
The maximum insurance on all joint accounts (accounts held with other individuals) is $250,000.
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14. Other Financial Service Providers
Mutual Funds
Stock Brokerage Firms
Insurance Companies
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15. Concept Check 5.1
Identify the primary goals of monetary asset management.
Explain the circumstances when it would be appropriate to have funds in a checking account, a savings account, or in investments.
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16. Concept Check 5.1
Describe the primary differences between depository institutions and other financial services providers.
Describe your insurance protections when you have funds on deposit in a depository institution.
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17. Learning Objective #2
Earn interest and pay no or low fees on your checking accounts.
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18. Tool #1: Interest-Earning Checking Accounts
Checking account are accessed through
Checks
Debit (or Check) Cards
Electronic transfers
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19. 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
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20. When You Write a Check Cleared Substitute Check Stop-Payment Order
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21. Payment Instruments for Special Needs
Traveler’s Checks
Money Orders
Certified Check
Cashier’s Check
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22. Endorse Your Checks Properly
Bank Endorsement
Special Endorsement
Restrictive Endorsement
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23. Protect Yourself from Bad Check Fees
Automatic Funds Transfer Agreement
Automatic Overdraft Loan Agreement
Courtesy Overdraft/Bounce Protection
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24. Concept Check 5.2
Distinguish between an interest-paying checking account and a lifeline account.
What is meant by free checking?
List three checking account fees or penalties that you could easily avoid by using your account properly.
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25. Learning Objective #3
Make the best use of the benefits of savings accounts.
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26. Tool #2: Savings Accounts
Time Deposits
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27. Tool #2: Savings Accounts
Statement Savings Account (or Passbook Savings Account): Permit frequent deposits or withdrawals of funds.
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28. Tool #2: Savings Accounts
Certificates of Deposit (or CDs)
Variable-Rate Certificates of Deposit (or Adjustable-Rate CDs)
Brokered Certificates of Deposit
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29. Tool #2: Savings Accounts
How to save:
“Pay Yourself First”
Saving is not glamorous; slow and steady wins the race!
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30. Tool #2: Savings Accounts
Emergency fund
Other savings goals can be broken down into short-term goals and monthly savings amounts.
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31. Savings Account Interest
Amount of Money on Deposit
Method of Determining the Balance
Interest Rate Applied
Annual Percentage Yield (APY)
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32. Savings Account Interest
Frequency of compounding
Average Daily Balance Method is best.
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33. 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.
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34. Concept Check 5.3
Describe reasons to keep money in a savings account rather than a checking account.
Distinguish between statement savings accounts and CDs.
Explain the benefits of a pay-yourself-first approach to saving.
Describe how you can use information about APY to your advantage.
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35. Learning Objective #4
Explain the importance of placing excess funds in a money market account.
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36. Tool #3: Money Market Accounts
Super NOW Accounts
Money market deposit accounts
Money market mutual funds
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37. Asset Management Accounts
Central Asset Account (or AMA)
Sweeps
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38. How Ownership of Accounts Is Established
Individual Account
Payable at Death Designation
Joint Account
Joint-tenancy with right of survivorship
Tenancy-in-common
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39. Concept Check 5.4
Explain the benefits of opening a money market account.
Distinguish between a super NOW account and a money market account.
Identify the feature of a depository institution accounts not available with money market mutual funds.
List some benefits of an asset management account.
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40. Learning Objective #5
Describe electronic money management, including your legal protections.
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41. Electronic Money Management
Electronic Funds Transfers (or EFTs)
ATM Transaction Fee: Payments levied each time an ATM is used.
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42. Consumer Protection Regulations
Electronic Funds Transfer Act
Disclosure Statement
Periodic Statements
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43. Consumer Protection Regulations
Fixing errors
Protection for lost cards
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44. Concept Check 5.5
Distinguish among credit cards, debit cards, and a stored-value card.
List the steps you should take if you find an error in your periodic statement regarding an electronic transaction.
Summarize the rules that apply if you lose your ATM or debit card and it is used without your authorization.
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45. Learning Objective #6
Discuss your personal finances and money management more effectively with loved ones.
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46. The Psychology of Money Management
Managing money and making financial decisions are different.
People ascribe strong emotions to money.
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47. The Psychology of Money Management
How to talk about financial matters.
Get to Know Yourself
Focus on Commonalties
Learn to Manage Financial Disagreements
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48. The Psychology of Money Management
Use Positive “I” Statements
Be Honest and Talk Regularly
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49. 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
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50. Concept Check 5.6
Explain why it is difficult for many people in relationships to talk about money matters.
Identify four ways you could more effectively communicate about money matters.
List four things that parents can do to help their children be better money managers.
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51. Top 3 Financial Missteps in Managing Checking and Savings Accounts
People slip up in managing checking and savings accounts when they do the following:
1. Paying high fees unnecessarily for bounce protection.
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52. Top 3 Financial Missteps in Managing Checking and Savings Accounts
2. Keeping too much money in a checking account where it earns very little interest.
3. Failing to reconcile their accounts on a regular basis.
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53. Do It NOW! Avoiding overdraft fees is a must. Start today by:
1. Finding out what type of overdraft protection you have, if any, on your checking accounts.
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54. Do It NOW!
2. Signing up for automatic funds transfer to be used first if you make an overdraft. 3. Making sure that your bank will block use of your debit card if there are insufficient funds in the account at the time of the usage.
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