1. Take Charge of Your Finances
Savings Tools
Take Charge of Your Finances
Financial Literacy

2. To Develop a Savings Fund:
Determine how much money is
appropriate for a savings fund 1.
Determine which savings
tools in which to place money 2.

3. Savings Tools
Savings tools are secure and liquid accounts offered by depository institutions assisting in the management of a savings fund

4. Savings Tools Five types of savings tools Checking Account
Savings Account
Money Market Deposit Account
Certificate of Deposit
Savings Bond
Five types of savings tools
Determine which savings tools are appropriate to assist in the attainment of personal financial goals

5. Low Risk Savings tools are very secure
Most depository institutions offering savings tools are backed by government insurance

6. FDIC
The most common type of government insurance is offered by the Federal Deposit Insurance Corporation (FDIC)
FDIC is a federal government agency insuring certain depository institutions against loss
If a depository institution covered by FDIC fails, FDIC will restore the lost funds up to $250,000 per account

7. NCUA
The National Credit Union Administration is a federal agency, much like the FDIC
It will cover member accounts at the same level as the FDIC

8. Checking Account DEFINITION INTEREST
Tool used to transfer funds deposited into an account to make a cash purchase
INTEREST
May be non-interest or interest earning
Interest rate is usually the lowest available for the savings tools

9. Checking Account ACCESSIBILITY Most liquid of all the savings tools
Funds are easily accessed by:
Checks
Automated teller machines (ATMs)
Debit cards
Telephone
Internet

10. Checking Account FEATURES Can have minimum balance requirements
Can charge transaction fees
Can have a limit on the number of checks written monthly
Reduces the need to carry large amounts of cash
Before opening a checking account, learn all of the requirements and restrictions.

11. Savings Account DEFINITION INTEREST
Account to hold money not spent on consumption
INTEREST
Interest earning
Lower interest rates compared to the other savings tools except checking accounts

12. Savings Account ACCESSIBILITY
More liquid than all savings tools except a checking account
Funds may be accessed or transferred between accounts through:
Automated teller machines
Telephones
Internet

13. Savings Account FEATURES Allows for frequent deposits or withdrawals
Easily accessible
Money storage for emergencies or daily living
Available at depository institutions
May require a minimum balance or have a limited number of withdrawals per month

14. Money Market Deposit Account
DEFINITION
A government insured account offered at most depository institutions

15. Money Market Deposit Account
INTEREST
Minimum balance requirement with tiered interest rates
The amount of interest earned depends on the account balance
For example: a balance of $10, will earn a higher interest rate than a balance of $2,500

16. Money Market Deposit Account
ACCESSIBILITY
Less liquid than checking and savings accounts
Accessibility is limited to a certain number of transactions per month (usually 3-6)

17. Money Market Deposit Account
FEATURES
Minimum amount required to open the account, often $1,000
If the average monthly balance falls below a specified amount, the entire account will earn a lower interest rate

18. Certificate of Deposit
DEFINITION
An insured interest earning savings tool that allows restricted access to the funds
Deposits have to be held for a certain length of time
Usually 7 days to 8 years
INTEREST
Varies depending upon the time length and amount of money deposited
The longer the period of time, the higher the interest rate

19. Certificate of Deposit
ACCESSIBILITY
Less liquid than checking, savings, and money market deposit accounts
Large fees are assessed if funds are withdrawn before the end of the designated time period

20. Certificate of Deposit
FEATURES
Minimum deposits range from $100-$250,000
Low risk and no fees if funds are held for the designated time period

21. Savings Bond DEFINITION
Discount bond purchased for 50% of the face value from the U.S. Government
Similar to a loan but is given to a company or the government

22. Savings Bond INTEREST Can be redeemed once the investment doubles
Amount of time it takes to double in value depends on the current interest rate offered
Invest $50 for a $100 savings bond
The bond can be redeemed once the investment doubles to reach $100

23. Savings Bond ACCESSIBILITY Least liquid of all the savings tools
Access to funds is restricted

24. Savings Bond FEATURES Safe, secure, and affordable
Purchased for $ $10,000.00
Taxes
Interest earned on a bond is tax exempt until redeemed
If the bond is used to pay for college, the interest it earned will be tax exempt when redeemed

25. Liquidity Liquidity means how quickly an asset can be turned into cash
Cash is the most liquid asset, since it is already cash
Generally, the more liquid the asset, the lower the interest rate.

26. Liquidity Checking Account Savings Account Most Lowest Interest Liquid
Least
Lowest Interest
Highest Interest
Checking Account
Savings Account
Money Market Deposit Account
Certificate of Deposit
Savings Bond

27. Choosing a Savings Tool
Different savings tools can be utilized to assist in reaching personal financial goals
Higher interest rates are a trade-off for lower liquidity
Higher Interest
Lower Liquidity

28. Choosing a Savings Tool
When and how often access is needed to funds helps determine which savings tool to use
An individual wants to develop an emergency savings fund
They need a very liquid account
A savings account is very liquid and accessible in emergency situations

29. Choosing a Savings Tool
When and how often access is needed to funds helps determine which savings tool to use
An individual wants to save money for retirement
They need a non-liquid savings tool, which will not be accessed for many years
A non-liquid savings tool will give a better interest rate

30. Choosing a Savings Tool
By understanding the features of different savings tools, an individual can choose which tools will help them reach their financial goals.

31. Depository Institutions
Features of savings tools vary between different depository institutions
Interest rates
Accessibility options
Fees
Penalties
Minimum balance requirements

32. Depository Institutions
Research and compare savings tools at different depository institutions in order to find the best option
Not limited to one depository institution
Can have different savings tools at different depository institutions

33. Savings Tools Scenarios
Read each Savings Tool Scenario
Discuss which savings tool would be recommended for each scenario

34. Savings Tools Scenario #1
Mariah has twin daughters that will be graduating from high school in two years. They both have a goal to attend college after graduation, and Mariah wants to help them reach this goal by paying for some of their schooling. She has $2,000 for each daughter that she would like to save and then be able to access in two years. Which savings tool would you recommend Mariah utilize and why?

35. Savings Tools Scenario #2
Conner and Lisa were recently married and purchased a new house. They received $1,000 as a wedding present from Lisa’s parents. They want to use this money to buy new furniture for their house in six months. Which savings tool would you recommend Conner and Lisa utilize and why?

36. Savings Tools Scenario #3
Sean is a high school student that just received his first paycheck from his new part-time job at the local grocery store. He currently has no expenses to pay, and his goal is to save every paycheck from his job to buy a new car in two years. He needs to find a savings tool that will help him reach his financial goal. Which savings tool would you recommend Sean utilize and why?

37. Savings Tools Scenario #4
Brittany recently moved into her first apartment. Before, she was living with her parents and had very few expenses to keep track of. Now that she has to pay rent and utilities for her apartment, she needs to find a savings tool that will help her manage her money and ensure she can pay her bills every month. Which savings tool would you recommend Brittany utilize and why?

38. Savings Tools Scenario #5
Bryan has a goal to become financially secure by developing an emergency fund. He has been saving twenty percent of his net income for the past year and now has $2,000. He plans to maintain this balance and only use this money for emergency expenses. Which savings tool would you recommend Bryan utilize and why?

39. Savings Tools Scenario #6
Paul and Grace want to purchase a house in two years. They want to begin saving money to use for the down payment on a home. They are able to save $300 per month and need to know which savings tool would be the best option for them to put their money in. Which savings tool would you recommend Paul and Grace utilize and why?

40. Five types of savings tools:
Summary
Five types of savings tools:
Checking Account
Savings Account
Money Market Deposit Account
Certificate of Deposit
Savings Bond

41. Summary Savings tools are very secure
Most depository institutions offering savings tools are backed by FDIC insurance
Different savings tools can be utilized to assist in reaching personal financial goals
Features of savings tools vary between depository institutions