Cash Or Liquid Asset Management

Financial Institutions

• Deposit-Type Financial Institutions– Commercial Banks– Savings and Loan Associations– Savings Banks– Credit Unions

• Nondeposit-Type Financial Institutions– Mutual Funds– Stockbrockerage Firms

Commercial Banks

• Offer widest variety of financial services– Checking and savings accounts, credit cards, safety

deposit boxes, financial consulting, and lending• Dominate in terms of dollar value of the assets

they hold• Have more branch offices or locations than

any other type of financial institution• Many offer online banking services

Commercial Banks

• Citibank, NationsBank, Regions, Bank of America, US Bank

Community Banks

• Are similar to commercial banks but are located in a particular area or region

• Less locations and not as many services offered

• Many pride themselves on customer service• “Small-town”• CFSB, Heritage, Murray Bank, Citizens Deposit,

1st Kentucky

Credit Union

• Not-for-profit cooperatives • Established by churches, univerisities, trade

unions, and corporations – Only open to members of that organization

• Offer a wide range of competitive financial services

• More efficient, smaller scale• Pay higher interest rates and have lower fees

and minimum balances

Credit Union

• Murray State Credit Union, Navy Federal Credit Union, General Tire Credit Union

Nondeposit-type Financial Institutions

• Mutual Fund- An investment fund that raises funds from investors, pools the money, and invests it in stocks, bonds, and other investments.

• Investors own shares proportionate to the amount of their investment level.

Cash Management Alternatives

• Checking Accounts• Saving Accounts• Money Market Deposit Accounts• Certificates of Deposit• Money Market Mutual Funds• U.S. Treasury Bills, or T-Bills• U.S. Series EE Bonds

Checking Account

• Demand Deposit- A type of checking account on which no interest is paid

• NOW (Negotiable Order of Withdrawal) Account- A checking account on which you earn interest on your balance– Minimum balance– Monthly Fees

Savings Account

• Time deposit– May be required to keep money deposited for a

minimum time period• A deposit account that pays interest• Make withdrawals at the bank with a

withdrawal slip or with an ATM card

Money Market Deposit Accounts

• Alternative to savings account offered by commercial banks

• Rate of interest varies with the current market rate of interest

• Interest rate is higher that regular savings account

• Offers limited check writing service• Requires higher minimum balance than regular

savings ($1000 +)

Certificate of Deposit

• Pays a fixed rate of interest while keeping your funds on deposit for a set period of time

• 30 days to several years• The longer time period funds are deposited,

the higher rate of interest• Interest rate stays fixed for the life of the CD• Early withdrawal penalties

Money Market Mutual Funds

• Mutual funds that invest in short-term notes of very high denomination

• Earn a higher rate of return• Limited check writing privileges

U.S. Treasury Bills (T Bills)

• Short term notes of debt issued by the federal government, with maturities ranging from 3 months to 12 months

• Minimum denomination is $1000

U.S. Series EE Bonds

• A type of security that’s actually a loan on which you receive interest

• When bond matures you get back your investment

• Low denominations and variable interest rates• When a bond is purchased, its price is ½ its

face value (buy a $50 bonds for $25, but it will be worth $50 when it matures)