Chapter 5, Section 2 Savings and Payment Methods Personal Finance Chapter 5, Section 2 Savings and Payment Methods

Objective Compare different savings and payment plans

Types of Savings Regular Savings Account: Liquid, but low interest Certificate of Deposit (CD): Time deposit that requires you to leave the money for a set amount of time. CD: Low risk, higher interest Requirements: Certain amount, pay penalty if you withdraw early, money is “tied up”

Money Market Accounts Savings account in which interest rates vary from month to month Higher minimum balance, insured against loss by FDIC

U.S. Savings Bonds Buy the bond for half the amount: Ex: Buy $1,000 bond for $500 Reaches Maturity and you get the $1,000 Exempt from taxes Government limits to $15,000 ($30,000 face value) per person a year

Rate of Return The percentage of increase in the value of your savings from earned interest Rate of Return = Total Interest Earned Original Deposit

Compounding The process in which interest is earned on both the principal and any interest already earned

Annual Percentage Yield (APY) The amount of interest that a $100 deposit would earn, after compounding, for 1 year

Overdraft Protection An automatic loan made to you if you write a check for more money than you have in your account

Stop-Payment Order A request that an institution not cash a particular check

Endorsement The signature of the payee, the party to whom the check has been written

Bank Reconciliation A report that accounts for the differences between the bank statement & your checkbook balance

Types of Checking Accounts 3 Main Categories Regular Usually no minimum balance Low fee (some banks will waiver) Activity Few checks Fee for each check Service charge Interest-earning Combine checking and savings Pay you interest if you maintain a certain balance

Evaluating Checking Accounts Weigh the following factors: Restrictions Fees and charges Interest Special services

Using a Checking Account

Using a Checking Account Opening a Checking Account Decide individual or joint account Sign a signature card Make opening deposit Order checks, card, etc. Writing Checks Write the current date Write the payee Record numerals for the amount Record amount in words Sign the check Record amt, #, and payee in check register Calculate new balance

Using a Checking Account Other Payment Methods Certified Check Cashier’s Check Money Order Travelers Check Prepaid Travelers Cards Organizations

Complete Chapter 5 questions 150, 1-5 Review key concepts