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Savings Tools

Savings Tools. Take Charge. Types of Savings Tools. Ideal for Storing Emergency Savings. Insured depository i nstitutions offer accounts which are:. How will a consumer know if their depository institution offers secure accounts?. Savings Tools Characteristics.

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Savings Tools

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  1. Savings Tools Take Charge

  2. Types of Savings Tools

  3. Ideal for Storing Emergency Savings Insured depository institutions offer accounts which are: How will a consumer know if their depository institution offers secure accounts?

  4. Savings Tools Characteristics Each savings tool has different characteristics Goal: Determine the savings tool most appropriate for reaching a financial goal

  5. Checking Account What are common ways to access funds in a checking account?

  6. Checking Account Features

  7. Savings Account What are common ways to access funds in a savings account?

  8. Savings Account Features

  9. Wells Fargo Vs. Bank of America

  10. Money Market Account Which would typically earn a higher interest rate? An account with a $10,000 balance or a $2,500 balance?

  11. Money Market Account Features

  12. Wells Fargo Vs. Bank of America

  13. Certificate of Deposit (CD) Why would a depository institution typically offer higher interest rates for CD’s with a longer time period or more money invested?

  14. Certificate of Deposit Features

  15. Wells Fargo Vs. Bank of America

  16. Matching Savings Tools to Goals Consider these factors when determining the most appropriate savings tool for your financial goal

  17. You Decide: Which Tool is Best?

  18. Liquidity Least Liquid/HighestInterest Most Liquid/Lowest Interest Higher interest rates are a trade-off for lower liquidity Money Market Deposit Account Checking Account Savings Account Certificate of Deposit

  19. Terms and conditions such as interest rates, fees, and minimum balance requirements may vary. Analyze the features of a savings tool among depository institutions

  20. Summary Understand the features of savings tools to select the most appropriate tool for each financial goal

  21. Retirement Plan Options • Pension Plans [401(k)] • Keogh-Self employed pension plan • IRA / Roth IRA • IRA-Taxed at the end, money taken out • Roth IRA- Taxed at the beginning • Real Estate is often seen as an INVESTMENT

  22. Investing for Retirement • Pension plans (401K): company plans that provide retirement income for their workers. • A portion is withheld from your paycheck • Company matches contribution • No Federal tax until you withdraw funds (tax deferred) • Maximum Contribution limit

  23. Individual Pension Plans • Keogh plan-retirement plan for self-employed individuals. • Can save up to 15% • Can deduct that amount from taxable income • Maximum contribution limit

  24. IRA / Roth IRA • Retirement Plan for individuals or married couples • Savings grow tax free • Invested in mutual funds, stocks or other securities

  25. Real Estate • Land & Buildings • Homes/Developed land (safer) • Undeveloped property (usually riskier) • Not very liquid – what does that mean?

  26. How much to save and invest?

  27. How much to save and invest? • Tradeoff! • Risk Tolerance • Rate of Return • Liquidity • Income

  28. Diversification, Risk, & Values • Diversification • Spreading of investments among several different types to lower overall risk • Risk • Every person has a different Risk tolerance • Values • Your values may determine where/what you invest your money in

  29. Stocks & Bonds • Stock • A Share of a company’s assets • Stockholders • People who invest in a corporation & own some of it’s stock

  30. Bonds • Tax-Exempt Bonds • Sold by local & state governments. Interest paid on the bond is not taxed by the Federal Gov. • Savings Bonds • Issued by the Federal Gov. as a way of borrowing money. • Purchased at ½ the face value (EE bonds)

  31. Stocks vs. Bonds STOCKS BONDS Corp. not required to issue Represent debt Interest must be paid regardless of profit Have maturity date Bondholders have no control of the corp. Bondholders claim against property comes before stockholders • All corp. issue stock • Represent ownership • Stocks do not have fixed rate • Dividends only paid when there is a profit • No maturity date • Board of directors in control • Stockholders have claim against property of corp.

  32. Stocks • Broker • A person who acts as a go-between for buyers & sellers of stocks & bonds. • Internet brokerage firms are popular now. • Stock Exchanges • Place where stocks are bought/sold on a daily basis. • NYSE –Largest stock exchange • Chicago Exchange –example of regional • Tokyo & London –examples of foreign

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