Managing Your Money Ch 12

Save for your future Create a savings plan Clear idea of why and how much your saving Create a savings strategy Save automatically if you can Reward yourself for hitting goals Store your savings Return- income earned from funds that are not spent

Types of bank accounts Savings Accounts Allows you to deposit and withdraw at any time Earn low fixed rate of interest Compound interest APY (annual percentage yield)- percent earned in interest Min $100 Time Deposit Certificate of Deposit (CD) 1, 2, 5 yrs More interest earned for the longer periods Early withdraw penalty Min $500 to $1000

Types of bank accounts Checking Accounts Advantages of checks or debit cards- don’t have to carry large sums of cash Checking account fees- monthly balance, overdraft, service charge Minimum usually $100 Money Market Accounts Deposit or withdraw at any time Rate of interest varies- due to the economy- usually slightly higher Min $500

Invest to earn a return Investing- using your savings in a way that earns a return Invest in corporate stock Dividends paid out or capital gains Risk vs Reward Blue Chip stock NYSE, NASDAQ Stock Portfolio Diversification- invest in a wide variety or corporations

Invest to earn a return Mutual fund- a financial organization that accepts funds from many people and invests them in a variety of stocks Invest in Corporate Bonds- less risk, must be repaid Used bonds- can have higher or lower interest Junk bonds- for companies in financial trouble- high risk high reward

Money Management Assistance Investment information Wall street journal Financial adviser- investment advise for a fee

Protect yourself with insurance Insurance- used to protect yourself from a variety of losses Premiums and Past events- pay more if riskier to cover Deductible- amount insured person must pay before insurance company does anything Types of Insurance Property insurance- house, cars, stolen goods Liability Insurance- losses of injury cause to other person or property Personal insurance- protect from financial loss (medical, life)

Your Insurance Needs Impossible to eliminate risk Rank your needs Always purchase liability insurance protection Umbrella policy- increase liability to $1-2 mil Should have medical If you have a family life insurances a must Decision to purchase insurance- always a trade off