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Personal Financial Planning

Personal Financial Planning. Unit 2 “Saving Options”. “Short-term” Financial Service Needs. It is important to consider your short-term goals when assessing your financial services needs Short-term needs can include Daily purchases Living expenses Emergency fund Services needed

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Personal Financial Planning

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  1. Personal Financial Planning Unit 2 “Saving Options”

  2. “Short-term” Financial Service Needs • It is important to consider your short-term goals when assessing your financial services needs • Short-term needs can include • Daily purchases • Living expenses • Emergency fund • Services needed • Check cashing & ATM services • Savings & money market accounts • Checking accounts

  3. “Long-term” Financial Service Needs • Long-term needs include • Major purchases • Long-term financial security • Services needed • Savings – CD’s, Savings Bonds • Loans • Investment services • Tax preparation • Insurance • Budgeting

  4. Savings • Safe storage of funds (money) for future use is a basic need for everyone • Money deposited in a financial institution is kept safe and insured up to $250,000 per account • FDIC – “Federal Deposit Insurance Company” for banks • NCUA – “National Credit Union Administration” for credit unions

  5. Types of Financial Institutions • Commercial Banks – for-profit institution with a full range of financial services • Savings & Loans Associations – traditionally specializes in savings accounts and mortgage loans but now offers more services like the commercial banks • Credit Unions – a nonprofit financial institution that is owned by its members and organized for their benefit

  6. Choosing a Financial Institution • Where can you get the highest interest rate for your savings? • Where can you obtain a checking account with low or no fees? • Will you be able to borrow money if needed? • Do they offer free financial advice? • Does it have convenient locations? • Online banking services?

  7. Types of Savings Plans • Regular Savings • Certificates of Deposit (CD’s) • Money Market Accounts • U.S. Savings Bonds

  8. Regular Savings & CD’s • Regular Savings • Good for frequent deposits and withdrawals • Require little or no minimum balance • Can withdraw “on demand” • Trade-off – Low interest rates • Certificates of Deposit • Money is left on deposit for a stated period of time (6, 12, 18, 24 months) • Money becomes available at the “maturity date” • Earns a higher interest rate – the longer the time frame, the higher the interest rate • Money can be withdrawn before the maturity date, but with penalties

  9. Money Market & Savings Bonds • Money Market • Requires a minimum balance - $1000 • Earns interest that varies from month to month • More of an investment that is tied to the market • U.S. Savings Bonds • Issued by the government • Amounts range from $25 to $5,000 (face values of $50 to $10,000 respectively) • Reaches face value at maturity date (up to 30 years)

  10. Evaluating Savings Plans • Rate of Return • The percentage increase in the value of your savings from earned interest • Compounding • The process in which interest is earned on both principal and on any previously earned interest • Principal is the original amount you deposited • Can take place every year, every quarter, month, or even every day • APR = is the amount of interest your deposit would earn in one year

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