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Personal Finance

Personal Finance. Savings and Checking Accounts. Review of yesterday…. Describe how compounding works. What are the three factors that affect the performance of your compounding? How are risk and return related?. Today’s Discussion. Savings Accounts Checking Accounts.

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Personal Finance

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  1. Personal Finance Savings and Checking Accounts

  2. Review of yesterday… • Describe how compounding works. • What are the three factors that affect the performance of your compounding? • How are risk and return related?

  3. Today’s Discussion • Savings Accounts • Checking Accounts

  4. How Banks (Do Not) Work

  5. How Banks Work • Customers deposit money (Bank pays interest) • Bank loans money (Bank collects interest) • Bank keeps “fractional reserve” on hand • Fees • ATM • Bounced Checks • Account Maintenance • Many, many more

  6. Banks v. Credit Unions • For-Profit Business • Anyone can be a customer • Higher fees and rates on loans • Lower rates on savings • Non-Profit • Must be a member of a certain group to join • Employer • Community • Lower fees and loan rates • Higher savings rates

  7. What your bank can do for you • Main types of accounts • Savings Accounts • Checking Accounts • Money-market Accounts • Certificates of Deposit (CD’s) • Other services (we’ll discuss later) • Insurance • Investing • Loans

  8. Savings Accounts • FDIC Insured • Up to $250,000 (through 12/31/13) • Deposit money & it earns interest • 0-2% typical interest for a savings account • Weekly changes in interest rate possible • Withdraw money whenever, with no penalty • Interest rate • Generally low • May be higher if you keep more $$ in your account

  9. Money-Market Accounts • Similar to savings account, but more restrictions • Fewer withdrawals allowed • Higher minimum balances required • Interest rates could change weekly • Pays a higher interest rate than regular savings • But not MUCH higher • NOT FDIC Insured

  10. Certificates of Deposit (CD) • Agree to keep money deposited for certain amount of time • 3-month, 6-month, 1-year, 2-years, 5-years • Guaranteed interest rate for life of CD • Penalties if you withdraw money before time is up • Highest interest rates of any bank savings product • Generally, NOT for short-term savings unless you are laddering

  11. Checking Accounts • Similar to savings accounts • Deposit and withdraw money (checks & ATM) • May or may not earn interest • Debit Cards • FDIC Insured • Online Banking • Demonstration – Mr. Martin Acct.

  12. Rate Comparison Activity • Using the internet, search for a banking website (any bank will do). Find the Annual Percentage Yield (APY) on the following and write the rate and the bank on the board • Checking Account • Savings Account • Money-Market Account • 6-Month CD • 1-Year CD • 5-Year CD

  13. Selecting a bank • What are the interest rates offered? • Compare APY (Annual Percentage Yield) • Rules, restrictions and fees for accounts? • Read the FINE PRINT! • Features of accounts • Overdraft protection, ATM, Online Banking • Direct-Deposit of paychecks • Convenient and helps you manage money • Look for Online Banks for your savings • Convenient • Higher rates

  14. Activity: Check-point quiz • We will take the 10 question savings & banking quiz on CNN to see who is “money.” • There will be a spot in the room for “A,” “B,” “C,” and “D.” • After each question, move to the spot that you think corresponds with the correct answer • http://cgi.money.cnn.com/tools/cgiquiz/cgiquiz_101.jsp?id=3

  15. Tomorrow… • Comparing Banks Activity

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