2 Cash Management Cash Management The daily routine of handling money to take care of individual or family needs.
3 Cash ManagementEffective cash management includes having available money for:Living expenses;Emergencies;Savings;Investing.
4 Cash Management Tool Five types of cash management tools: Checking AccountSavings AccountMoney Market Deposit AccountCertificate of DepositSavings Bond
5 Checking Account Checking Account Features may include: Tool used to transfer funds deposited into an account to make a cash purchase.Checking accounts may be non-interest or interest earning.Features may include:Minimum balance requirements;Charge transaction fees;Limited number of checks written monthly.Reduces the need to carry large amounts of cash.
6 Savings Account Savings Account Account to hold money not spent on consumption.Have a lower interest rate than other cash management tools
7 Money Market Deposit Account A combination savings/investment plan in which money is used to purchase safe, liquid, securitiesminimum balance requirementtiered interest rates- amount of interest earned depends on the account balanceFor example: a balance of $10, will earn a higher interest rate than a balance of $2,500.
8 Money Market Deposit Account continued limited to three to six transactions each monthFeatures of may include:Minimum amount required to open the accountoften $1,000balance falls below a specified amountearn a lower interest rate
9 Certificate of Deposit (CD) A deposit that earns a fixed interest rate for a specific length of timeInterest rates vary depending upon specified time length.The longer the length, the higher the interest rate.
10 Certificate of Deposit continued Features may include:Range from seven days to eight years in length;Minimum deposits range from $100-$100,000;If funds are withdrawn before the expiration date, penalties are assessed;Different types to fit your needsStandard- fixedFlexible- can add money and withdraw on occasion free of charge
11 Savings BondsA registered, non-transferable bond issued and backed by the U.S. Government"the All American Investment"easy way to save money safelyget a good market returnRates change every May and November based on either current market rates or inflation.
12 Savings BondCan buy from bank, through payroll deductions or from Federal ReserveTwo typesI Bond-state and local income tax exemptfederal income tax can be deferredIf cashes in before five yearssubject to a 3-month earnings penaltyearn interest for as long as 30 years
13 Savings Bonds Series EE Savings Bond Government tracks bond by SS# Earn fixed rate of returnBuy for 50% of face valueMinimum $50 bond- Max $10,000 per year$50 bondBuy for $25When mature you receive $5020 years to maturityGovernment tracks bond by SS#
14 Average Interest Earned Cash Management ToolsToolAverage Interest EarnedPurchase PlaceSpecial FeaturesChecking Account1.5%Commercial Banks, Savings & Loan Associations, Credit UnionCan be used in place of cash, funds can be easily accessedSavings Account2.3%Easily accessed, temporary holding place for fundsMoney Market Account2.6%Minimum balance, limited transactions, tiered interest ratesCertificate of Deposit4.0% - 5.4%, depending on the length of depositCommercial Banks, other institutions which accept deposits for a fixed periodPenalties for early withdrawals, no deposits or withdrawals are made after initial investmentSavings Bonds4.0% - 5.4%, depending on the length of bondCommercial Banks, Credit Unions, employer payroll deduction plansTax advantages, a loan to the federal government
15 LiquidityLiquidityHow quickly and easily an asset can be converted into cash.Investors should:Invest in both liquid and non-liquid tools.Liquid assets are important for emergencies when cash must be quickly accessed.Cash management tools are protected by the U.S. Government against loss.
16 Liquidity Checking Account Most Liquid Savings Account Money Market Deposit AccountCertificate of DepositSavings BondLeast Liquid
17 Low Risk These five cash management tools are low risk: Insures the funds so the consumer does not lose money on the investment.However, they have lower interest rates.Causes low returns