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Managing Your Cash. Did You Know?. How do small amounts of money saved and invested easily grow into larger sums?? INTEREST!! Money invested earns interest The profit made on money invested. Cash Management. Cash Management
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Did You Know? • How do small amounts of money saved and invested easily grow into larger sums?? • INTEREST!! Money invested earns interest • The profit made on money invested.
Cash Management Cash Management • The daily routine of handling money to take care of individual or family needs
Cash Management Effective cash management includes having available money for: • Living expenses • Emergencies • Savings • Investing
Cash Management Tool Cash Management Tool • A financial account used to assist with daily cash management
Checking Account • Use: Tool used to transfer funds deposited into an account to make a cash purchases, write checks, and make ATM withdrawals • Interest: Most checking accounts do not pay interest • Accessibility: Money can be withdrawn at any time
Savings Account • Use: Tool used to hold or store money for emergencies or large purchases • Interest: Does earn interest • Accessibility: Money can withdrawn at any time
Certificate of Deposit (CD) • Use: Tool used to invest money on a short-term basis. A CD has a set term (1-5 years) • Interest: Does earn interest! But rates vary. The longer the length of the term, the higher the interest rate • Accessibility: Restricted access to the funds, must keep money in CD for the full term or pay penalties ):
Liquidity Liquidity • How quickly and easily an asset can be converted into cash • Liquid assets are important for emergencies when cash must be quickly accessed
Liquidity Most Liquid Least Liquid
Low Risk These three cash management tools are LOW RISK: • Funds in these type of accounts are insured by the Federal Deposit Insurance Corporation (up to $250,000) • However, they have lower interest rates which causes low earnings
Checking Account Tools • Debit Card • Withdraw money from an Automated Teller Machine (ATM) • Plastic card that looks like a credit card • Electronically connected to a bank account • Money is automatically taken from the bank account when purchases are made • Requires a PIN (personal identification number) • Confirms the user is authorized to access the account
Checking Account Tools • Checks • Write checks to transfer large sums of money • Deposit checks when receiving large sums of money
Parts of a Check • Personal Information • Account holder’s name and address • Check Number • Numbers used to identify checks • Date • The date the check is written • Pay to the Order of • The name of the person or business to whom the check is being written • Amount of the Check in Numerals • The amount of the check written numerically in the box • Amount of the Check in Words • Start at the far left of the line, write the amount in words, followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’ • Memo • Space used to identify the reason for writing a check; optional • Signature • The account holder’s signature agreeing to the transaction
Checking Account Tools • Checks are a DYING BREED • Direct deposit • Apps- ex. Venmo, Paypal, Square • https://www.youtube.com/watch?v=mbHQx3-pRI0 • http://www.slate.com/articles/technology/future_tense/2013/08/venmo_review_the_wallet_app_is_light_years_ahead_of_paypal.html • Google Wallet
THINK • What are the apparent pros and cons of checking, savings, and CD accounts?