THEME 2 Part 1A Managing Assets copy - HomeTeamsONLINE · 2017-12-31 · 3 Managing Your Cash &...

7/27/17

THEME2Part1AManagingBasicAssets

HonorsPersonalFinance

ManagingYourCash&Savings•  Establishinggoodfinancialhabitsinvolvesmanagingcashaswellasothertypesofassets.•  CashManagement– therouGne,day-to-dayadministraGonofcashandnear-cashresources,alsoknownasliquidassets,byanindividualorfamily.

ManagingYourCash&Savings•  Asarule,near-termneedsaremetusingcashonhand,andunplannedorfutureneedsaremetusingsometypeofsavingsorshort-terminvestmentvehicle.•  Inpersonalfinancialplanning,efficientcashmanagementensuresadequatefundsforbothhouseholduseandaneffecGvesavingsprogram.

ManagingYourCash&Savings•  CashManagementTips:①  Avoidcarryingcheckbook,debitcard,

orcreditcardwhenunplannedpurchasescouldoccur.

②  Whengoingshopping,setamaximumspendinglimit.

③  Establishanongoingsavingsprogram.

TheFederalReserveSystem•  TheFederalReserveisthecentralbankoftheUnitedStates.Itsuniquestructureincludes:

v afederalgovernmentagency,theBoardofGovernors,inWashington,D.C.,and

v 12regionalReserveBanks.

TheFederalReserveSystem•  TheframersoftheFederalReserveActpurposelyrejectedtheconceptofasinglecentralbank.Instead,theyprovidedforacentralbanking“system”withthreesalientfeatures:

TheFederalReserveSystem①  AcentralgoverningBoard,②  AdecentralizedoperaGngstructure

of12ReserveBanks,and③  AcombinaGonofpublicandprivate

characterisGcs.

7Memphis is in District 8

FinancialServices•  ThefinancialservicesindustryconGnuestoevolve,thanksinlargeparttotechnologyandchangingregulaGons.• Nolongerarecheckingaccountsoneplace,creditcardsanother,andbrokerageservicesyetanother.•  TodayfinancialinsGtuGonsareallencompassing.

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FinancialServices•  ThoughtherearefourprimaryfinancialinsGtuGons,theyallcanbeclassifiedintotwobroadgroups:

①  Depository②  Nondepository

•  ThisisbasedonwhetherornottheyacceptdepositssuchasatradiGonalbank.

FinancialInsGtuGons•  Thereare4primary:①  CommercialBanks②  CreditUnions③  Savings&Loans④  BrokerageFirms

FinancialInsGtuGons-DEPOSITORY•  ThevastmajorityoffinancialtransacGonstakeplaceatdepositoryfinancialinsGtuGons:•  CommercialBanks(Brick&Internet)

•  Savings&Loan•  CreditUnions

FinancialInsGtuGons-DEPOSITORY•  Banks-Thelargest&oldestofallfinancialinsGtuGons,relyingmainlyoncheckingandsavingsaccountsassourcesoffundsforloanstobusinesses&individuals.•  TheyfuncGonasafor-profitinsGtuGon.

FinancialInsGtuGons– DEPOSITORYBankOfferings

Deposit–anaddiGontothebalanceonyourbanksavingsorcheckingaccount.

•  Accountsarestartedbymakinga:

SavingsAccount–isabankaccountthatearnsinterest.

TimeDeposits–asavingsdepositatafinancialinsGtuGon;remainsondepositforalongerGmethanademanddeposit.

Theseareofenreferredtoas:

Checkingaccounts-abankdepositagainstwhichcheckscanbedrawnbythedepositor.

DemandDeposit–anaccountheldatafinancialinsGtuGonfromwhichfundscanbewithdrawnondemandbytheaccountholder;sameasacheckingaccount.

AcheckingaccountheldatafinancialinsGtuGonisknownasa:

• Manyemployersofferanaddedbonusforthosewithacheckingaccount;paycheckscanbe:

DirectDeposit– adepositofmoneybyapayerdirectlyintoapayee'sbankaccount.

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•  Inasavingsaccount,andrearoccasionssomecheckingaccountsyourmoneyworksforyoubyearning:

Interest-incomeearnedonadepositorpaymentowedonaloan.

•  Thereare2typesofinterest.SimpleinterestmeansthatyouonlyearninterestonyouriniGaldeposit.

•  CompoundinterestallowsyoutoearninterestnotonlyonyouriniGaldeposit,butalsoontheinterestyouearnasyougoalong.

FinancialInsGtuGons-DEPOSITORY•  CreditUnion-afinancialinsGtuGonownedbyitsmembersthatprovidessavingsandcheckingaccountsandotherservicestoitsmembershipatlowfees.OperaGngasanon-profitfinancialinsGtuGonownedbyitsmembers.

FinancialInsGtuGons-DEPOSITORY•  Savings&Loan-afinancialinsGtuGondesignedtocollectsavingsandusethatcapitaltomakeloans.Theytendtospecializeinrealestateloans.

FinancialInsGtuGons-DEPOSITORY•  BrokerageFirm-firmsthatbuyandsellstocks,bonds,andothersecuriGesfortheircustomersandprovideotherfinancialservices.

FinancialInsGtuGons• Howsafeisyourmoney?

• MostfinancialinsGtuGonsarefederallyinsured.Thosethatarenotareusuallyinsuredthroughastateorprivateinsurer.•  ItisbelievedthattheseinsGtuGonsarelessinsuredthanfederallyinsured.

FinancialInsGtuGons

•  BothprovideidenGcalprotecGonsincludingupto$250,000.00onaccounts.

Federal Depositors Insurance

Corporation

National Credit Union

Administration

FinancialInsGtuGons•  It’simportanttounderstandthatdepositinsuranceisprovidedtothedepositorratherthantoadepositaccount.•  Ex:$150,000inchecking,$75,000insavings,&$25,000inaCDallfromthesamebankisfullycovered.

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FinancialInsGtuGons•  YoucanincreasecoveragebyopeningdifferentaccountsunderdifferentdepositorsatthesameinsGtuGon.•  Ex:Amarriedcouplecanhaveoneaccountineachperson’snamefor$250,000each($500,000total).Thenajointaccountinbothnamesforanother$500,000(whichis$250,000peraccountowner).Total$1,000,000.

FinancialInsGtuGons•  AddiGonalAccountOpGons

MoneyMarketDepositAccounts–afederallyinsuredsavingsaccount,offeredbybanksandotherfinancialinsGtuGons,thatcompeteswithmoneymarketmutualfunds.Theseaccountsareverysafeandhighlyliquidshortterminvestments.Interestratesvaryfrommonthtomonth.

FinancialInsGtuGons•  AddiGonalAccountOpGons

MoneyMarketMutualFunds–amutualfundthatpoolsthefundsofmanysmallinvestorsandpurchasehighreturn,short-termmarketablesecuriGes.

Historicallytheseaccountspay1%to3%aboveregularsavingsaccounts.

ElectronicBankingServices

Thishelpstospeedupandsimplifythefinancialprocess.

ElectronicFundsTransfer(EFT’s)–systemsusingthelatesttelecommunicaGonsandcomputertechnologytoelectronicallytransferfundsintoandoutofcustomer’saccounts.

ElectronicBankingServices•  Banks&CreditUnionsalsoissue:

DebitCards– speciallycodedplasGcCardsusedtotransferfundsfromacustomer’sbankaccounttotherecipient’saccounttopayforgoodsorservices.

ElectronicBankingServices•  Inordertomakedebtcardsmoreusefulbanksuseremoteterminals:

AutomatedTellerMachines(ATM)–aremotecomputerterminalthatcustomersofdepositoryinsGtuGonscanusetomakebasictransacGons24/7.

ElectronicBankingServices•  IfyourbankbelongstoanEFT’snetwork,suchasCirrus,Star,orInterlinkyoucangetcashfromtheATMofanybankintheU.S.Aoroverseas.

ElectronicBankingServices•  SecurityconcernshavecausedfinancialinsGtuGonstobeginreplacingthecommonmagneGcstripwithEMV(Europay,MasterCard,Visa)chips.

OtherBankingServices

Safe-depositbox–arenteddrawerinabanksvault.

•  Boxescanberentedonaveragefor$30peryear,dependingonthesizeofthebox.

•  Youreceiveakeyandthebankkeepstheother.Bothkeysarerequiredtoopenthebox.

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UsingACheckingAccount

• Generalcheckingaccountprocedures:Ø Alwayswritechecksinblue/blackinkØ Alwayssignchecksthesameasthesignaturecard

Ø Printchecksfromonlinethataretaxrelated

UsingACheckingAccount•  RecordalltransacGons(checks,deposits,debitcardpurchases,ATMwithdrawals,automaGcEFTs)inthe

checkbookledger– orcheckregisterisabooklet,providedwithasupplyofchecks,usedtomaintainaccuraterecordsofallcheckingaccounttransacGons.

UsingACheckingAccount•  Accuraterecordsareimportanttoavoid

overdrafs– theresultofwriGngacheckforanamountgreaterthanthecurrentaccountbalance.Withoverdrafs,bothparGescanbecharged$10,$20,ormore.Youfortheoverdraf,andtherecipientwhodepositsa“badcheck”paysaswell.

•  Therearewaystopreventanaccidentaloverdraf.

OverdrafprotecGon– anarrangementbetweentheaccountholderandthedepositoryinsGtuGonwhereintheinsGtuGonautomaGcallypaysacheckthatoverdrafstheaccount.

•  ThereareGmeswhenyouneedtostopacheckyouhavealreadywriren.

stoppayment– anordermadebyanaccountholderinstrucGngthedepositoryinsGtuGontorefusepaymentonanalreadyissuedcheck.

•  Everymonthcheckingaccountholdersshouldcompletea:

accountreconciliaGon– verifyingtheaccuracyofyourcheckingaccountbalanceinrelaGontothebanksrecordsasreflectedinyourbankstatement.

UsingACheckingAccount•  SpecialTypesofChecks

Cashier’sCheck– acheckpayabletoathirdpartythatisdrawnbyabankonitselfinexchangefortheamountspecifiedplus,inmostcases,aservicefeeof$5to$10.

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Traveler’sCheck– achecksoldbymostlargefinancialinsGtuGonsthatcanbeexchangedforpurchaseorcurrencyinmostpartsoftheworld.

CerGfiedCheck– apersonalcheckthatisguaranteed,forafee,bythebankonwhichitisdrawn.

THEME 2 Part 1A Managing Assets copy - HomeTeamsONLINE · 2017-12-31 · 3 Managing Your Cash &...

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