1. Chapter 5, Section 2 Savings and Payment Methods
Personal Finance
Chapter 5, Section 2
Savings and Payment Methods

2. Objective
Compare different savings and payment plans

3. Types of Savings Regular Savings Account: Liquid, but low interest
Certificate of Deposit (CD): Time deposit that requires you to leave the money for a set amount of time.
CD: Low risk, higher interest
Requirements: Certain amount, pay penalty if you withdraw early, money is “tied up”

4. Money Market Accounts
Savings account in which interest rates vary from month to month
Higher minimum balance, insured against loss by FDIC

5. U.S. Savings Bonds Buy the bond for half the amount:
Ex: Buy $1,000 bond for $500
Reaches Maturity and you get the $1,000
Exempt from taxes
Government limits to $15,000 ($30,000 face value) per person a year

6. Rate of Return
The percentage of increase in the value of your savings from earned interest
Rate of Return = Total Interest Earned Original Deposit

7. Compounding
The process in which interest is earned on both the principal and any interest already earned

8. Annual Percentage Yield (APY)
The amount of interest that a $100 deposit would earn, after compounding, for 1 year

9. Overdraft Protection
An automatic loan made to you if you write a check for more money than you have in your account

10. Stop-Payment Order
A request that an institution not cash a particular check

11. Endorsement
The signature of the payee, the party to whom the check has been written

12. Bank Reconciliation
A report that accounts for the differences between the bank statement & your checkbook balance

13. Types of Checking Accounts
3 Main Categories
Regular
Usually no minimum balance
Low fee (some banks will waiver)
Activity
Few checks
Fee for each check
Service charge
Interest-earning
Combine checking and savings
Pay you interest if you maintain a certain balance

14. Evaluating Checking Accounts
Weigh the following factors:
Restrictions
Fees and charges
Interest
Special services

15. Using a Checking Account

16. Using a Checking Account
Opening a Checking Account
Decide individual or joint account
Sign a signature card
Make opening deposit
Order checks, card, etc.
Writing Checks
Write the current date
Write the payee
Record numerals for the amount
Record amount in words
Sign the check
Record amt, #, and payee in check register
Calculate new balance

17. Using a Checking Account
Other Payment Methods
Certified Check
Cashier’s Check
Money Order
Travelers Check
Prepaid Travelers Cards
Organizations

18. Complete
Chapter 5 questions
150, 1-5 Review key concepts