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7/27/17
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THEME2Part1AManagingBasicAssets
HonorsPersonalFinance
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ManagingYourCash&Savings• Establishinggoodfinancialhabitsinvolvesmanagingcashaswellasothertypesofassets.• CashManagement– therouGne,day-to-dayadministraGonofcashandnear-cashresources,alsoknownasliquidassets,byanindividualorfamily.
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ManagingYourCash&Savings• Asarule,near-termneedsaremetusingcashonhand,andunplannedorfutureneedsaremetusingsometypeofsavingsorshort-terminvestmentvehicle.• Inpersonalfinancialplanning,efficientcashmanagementensuresadequatefundsforbothhouseholduseandaneffecGvesavingsprogram.
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ManagingYourCash&Savings• CashManagementTips:① Avoidcarryingcheckbook,debitcard,
orcreditcardwhenunplannedpurchasescouldoccur.
② Whengoingshopping,setamaximumspendinglimit.
③ Establishanongoingsavingsprogram.
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TheFederalReserveSystem• TheFederalReserveisthecentralbankoftheUnitedStates.Itsuniquestructureincludes:
v afederalgovernmentagency,theBoardofGovernors,inWashington,D.C.,and
v 12regionalReserveBanks.
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TheFederalReserveSystem• TheframersoftheFederalReserveActpurposelyrejectedtheconceptofasinglecentralbank.Instead,theyprovidedforacentralbanking“system”withthreesalientfeatures:
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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.
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FinancialInsGtuGons• Thereare4primary:① CommercialBanks② CreditUnions③ Savings&Loans④ BrokerageFirms
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FinancialInsGtuGons-DEPOSITORY• ThevastmajorityoffinancialtransacGonstakeplaceatdepositoryfinancialinsGtuGons:• CommercialBanks(Brick&Internet)
• Savings&Loan• CreditUnions
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FinancialInsGtuGons-DEPOSITORY• Banks-Thelargest&oldestofallfinancialinsGtuGons,relyingmainlyoncheckingandsavingsaccountsassourcesoffundsforloanstobusinesses&individuals.• TheyfuncGonasafor-profitinsGtuGon.
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FinancialInsGtuGons– DEPOSITORYBankOfferings
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Deposit–anaddiGontothebalanceonyourbanksavingsorcheckingaccount.
• Accountsarestartedbymakinga:
FinancialInsGtuGons– DEPOSITORYBankOfferings
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SavingsAccount–isabankaccountthatearnsinterest.
TimeDeposits–asavingsdepositatafinancialinsGtuGon;remainsondepositforalongerGmethanademanddeposit.
Theseareofenreferredtoas:
FinancialInsGtuGons– DEPOSITORYBankOfferings
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Checkingaccounts-abankdepositagainstwhichcheckscanbedrawnbythedepositor.
FinancialInsGtuGons– DEPOSITORYBankOfferings
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DemandDeposit–anaccountheldatafinancialinsGtuGonfromwhichfundscanbewithdrawnondemandbytheaccountholder;sameasacheckingaccount.
AcheckingaccountheldatafinancialinsGtuGonisknownasa:
FinancialInsGtuGons– DEPOSITORYBankOfferings
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• Manyemployersofferanaddedbonusforthosewithacheckingaccount;paycheckscanbe:
DirectDeposit– adepositofmoneybyapayerdirectlyintoapayee'sbankaccount.
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FinancialInsGtuGons– DEPOSITORYBankOfferings
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• Inasavingsaccount,andrearoccasionssomecheckingaccountsyourmoneyworksforyoubyearning:
Interest-incomeearnedonadepositorpaymentowedonaloan.
FinancialInsGtuGons– DEPOSITORYBankOfferings
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• Thereare2typesofinterest.SimpleinterestmeansthatyouonlyearninterestonyouriniGaldeposit.
FinancialInsGtuGons– DEPOSITORYBankOfferings
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• CompoundinterestallowsyoutoearninterestnotonlyonyouriniGaldeposit,butalsoontheinterestyouearnasyougoalong.
FinancialInsGtuGons-DEPOSITORY• CreditUnion-afinancialinsGtuGonownedbyitsmembersthatprovidessavingsandcheckingaccountsandotherservicestoitsmembershipatlowfees.OperaGngasanon-profitfinancialinsGtuGonownedbyitsmembers.
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FinancialInsGtuGons-DEPOSITORY• Savings&Loan-afinancialinsGtuGondesignedtocollectsavingsandusethatcapitaltomakeloans.Theytendtospecializeinrealestateloans.
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FinancialInsGtuGons-DEPOSITORY• BrokerageFirm-firmsthatbuyandsellstocks,bonds,andothersecuriGesfortheircustomersandprovideotherfinancialservices.
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FinancialInsGtuGons• Howsafeisyourmoney?
• MostfinancialinsGtuGonsarefederallyinsured.Thosethatarenotareusuallyinsuredthroughastateorprivateinsurer.• ItisbelievedthattheseinsGtuGonsarelessinsuredthanfederallyinsured.
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FinancialInsGtuGons
• BothprovideidenGcalprotecGonsincludingupto$250,000.00onaccounts.
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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.
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FinancialInsGtuGons• AddiGonalAccountOpGons
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MoneyMarketDepositAccounts–afederallyinsuredsavingsaccount,offeredbybanksandotherfinancialinsGtuGons,thatcompeteswithmoneymarketmutualfunds.Theseaccountsareverysafeandhighlyliquidshortterminvestments.Interestratesvaryfrommonthtomonth.
FinancialInsGtuGons• AddiGonalAccountOpGons
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MoneyMarketMutualFunds–amutualfundthatpoolsthefundsofmanysmallinvestorsandpurchasehighreturn,short-termmarketablesecuriGes.
Historicallytheseaccountspay1%to3%aboveregularsavingsaccounts.
ElectronicBankingServices
Thishelpstospeedupandsimplifythefinancialprocess.
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ElectronicFundsTransfer(EFT’s)–systemsusingthelatesttelecommunicaGonsandcomputertechnologytoelectronicallytransferfundsintoandoutofcustomer’saccounts.
ElectronicBankingServices• Banks&CreditUnionsalsoissue:
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DebitCards– speciallycodedplasGcCardsusedtotransferfundsfromacustomer’sbankaccounttotherecipient’saccounttopayforgoodsorservices.
ElectronicBankingServices• Inordertomakedebtcardsmoreusefulbanksuseremoteterminals:
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AutomatedTellerMachines(ATM)–aremotecomputerterminalthatcustomersofdepositoryinsGtuGonscanusetomakebasictransacGons24/7.
ElectronicBankingServices• IfyourbankbelongstoanEFT’snetwork,suchasCirrus,Star,orInterlinkyoucangetcashfromtheATMofanybankintheU.S.Aoroverseas.
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ElectronicBankingServices• SecurityconcernshavecausedfinancialinsGtuGonstobeginreplacingthecommonmagneGcstripwithEMV(Europay,MasterCard,Visa)chips.
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OtherBankingServices
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Safe-depositbox–arenteddrawerinabanksvault.
• Boxescanberentedonaveragefor$30peryear,dependingonthesizeofthebox.
• Youreceiveakeyandthebankkeepstheother.Bothkeysarerequiredtoopenthebox.
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UsingACheckingAccount
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UsingACheckingAccount
• Generalcheckingaccountprocedures:Ø Alwayswritechecksinblue/blackinkØ Alwayssignchecksthesameasthesignaturecard
Ø Printchecksfromonlinethataretaxrelated
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UsingACheckingAccount• RecordalltransacGons(checks,deposits,debitcardpurchases,ATMwithdrawals,automaGcEFTs)inthe
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checkbookledger– orcheckregisterisabooklet,providedwithasupplyofchecks,usedtomaintainaccuraterecordsofallcheckingaccounttransacGons.
UsingACheckingAccount• Accuraterecordsareimportanttoavoid
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overdrafs– theresultofwriGngacheckforanamountgreaterthanthecurrentaccountbalance.Withoverdrafs,bothparGescanbecharged$10,$20,ormore.Youfortheoverdraf,andtherecipientwhodepositsa“badcheck”paysaswell.
UsingACheckingAccount
• Therearewaystopreventanaccidentaloverdraf.
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OverdrafprotecGon– anarrangementbetweentheaccountholderandthedepositoryinsGtuGonwhereintheinsGtuGonautomaGcallypaysacheckthatoverdrafstheaccount.
UsingACheckingAccount
• ThereareGmeswhenyouneedtostopacheckyouhavealreadywriren.
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stoppayment– anordermadebyanaccountholderinstrucGngthedepositoryinsGtuGontorefusepaymentonanalreadyissuedcheck.
UsingACheckingAccount
• Everymonthcheckingaccountholdersshouldcompletea:
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accountreconciliaGon– verifyingtheaccuracyofyourcheckingaccountbalanceinrelaGontothebanksrecordsasreflectedinyourbankstatement.
UsingACheckingAccount• SpecialTypesofChecks
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UsingACheckingAccount
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Cashier’sCheck– acheckpayabletoathirdpartythatisdrawnbyabankonitselfinexchangefortheamountspecifiedplus,inmostcases,aservicefeeof$5to$10.
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UsingACheckingAccount
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Traveler’sCheck– achecksoldbymostlargefinancialinsGtuGonsthatcanbeexchangedforpurchaseorcurrencyinmostpartsoftheworld.
UsingACheckingAccount
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CerGfiedCheck– apersonalcheckthatisguaranteed,forafee,bythebankonwhichitisdrawn.
UsingACheckingAccount
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