Savings & Checking Accounts

Savings & Checking Accounts

Saving Basics • Savings accounts provide an easily accessible place for people to store their money and to have money for emergencies. • It is recommended that you keep a minimum of 3 to 6 months of salary in your savings account.

Savings Account Uses • Emergencies • Future Purchases • Future Investing

Savings Accounts • Generally, banks will pay you interest on the amount of money you have in your savings account. • The bank can put restrictions on the number of withdrawals you can make or place a minimum amount on the withdrawal amount.

Two Types of Interest • Simple interest is calculated on the amount of money you deposit. • Compound interest is calculated on your deposits plus any interest you’ve already earned. Compound interest is more powerful. • So that $35 interest the bank paid you last quarter now becomes part of your new total, and you earn interest on that money too. Your money is growing all by itself. And you don’t have to do anything but keep your money in the bank. It’s that easy!!

Rule of 72 • The time it will take an investment (or debt) to double in value at a given interest rate using compounding interest.

Example of Rule of 72 • Doug put $2,500 into a savings account earning a 6.5% interest rate. How long will it take Doug’s savings to double? • Saved $2,500 • Interest Rate is 6.5%

Why Save? • Emergencies – such as illness, losing a job, or major car repairs • Future Purchases – Money can be used to meet future goals such as a new car, down payment on a home, or a vacation.

Strategies for Saving • Put money away into your savings account before you pay your other bills or use for spending • Set up an automatic transfer monthly from your checking account to your savings account. • Saved change and “found” money deposited monthly = bonus savings • Shop around for the highest APY (annual percentage yield) on your savings account.

Checking Accounts • Generally, checking accounts do not earn interest. • You can write a check or use your debit card to make purchases from your checking account rather than taking cash out of the ATM. • Checking accounts are usually used for day–to–day cash flow.

Watch out for Fees • ATM Fees: • The fee that you pay when you use an ATM from another bank. • You will most likely get hit with two fees: one charged by the bank whose ATM you used & one by your bank for dealing with the outside bank. • Bounced Check Fees: • When you write a check that you can’t cover, you will get hit with a fee (around $25 per bounced check). • Overdraft Fees: • The bank will cover the amount that is overdrawn for a fee of about $35 plus a daily charge of $2 to $10 until you deposit enough money in the account to cover the overdraft amount.

Round 1 • Pay Day! • Pay yourself $100 (Partner A & B)

Round 2 • Pick a Card (Partner A)

Round 3 • Pick a Card (Partner B)

Round 5 • Pay Day! • Pay yourself $100 (Partner A & B)

Round 9 • Pay Day! • You get paid $100 (Partner A & B)

Savings & Checking Accounts