Monday, March 27, 2017 Objective: Students will be able to examine the types of accounts available to consumers from financial institutions and the risks, monetary costs, and benefits of maintaining these accounts. Purpose: Many of you have or will have financial accounts.

Roles of Interest and Risk the higher the interest rate offered for savings, the more money will be available for savings the lowering the interest rate lowers the amount of money available for saving Risk: The chance that an investment's actual return will be different than expected the riskier an investment is, the higher the interest is

Checking Accounts Accounts that allow for numerous withdrawals and unlimited deposits Risks: none (insured by FDIC) Costs: fees (lower or none with minimum balance) Benefits: don't have to carry cash, can be jointly held

Savings Account Accounts that provide principal security and a modest interest rate generally for money that you don't intend to use for daily expenses Risks: none (insured by FDIC) Costs: makes your money less accessible (no checks or debit cards) Benefits: earn interest (often a small amount of money)

A $100 deposit, when compounded yearly at 5 percent, will more than double in value over 15 years. Would a higher interest rate encourage people to save more or less? Why?

Certificates of Deposits issued by a bank to a person depositing money for a specified length of time Risks: none (insured by FDIC) Costs: money tied up for a period of time, penalty for early withdrawal Benefits: constant interest rate (depends on the health of the economy), higher interest than savings accounts

Mutual Funds made up of several types of investments collected from many investors for the purpose of investing in securities such as stocks and bonds Risks: moderate (not insured by FDIC) Costs: fees, can lose money, taxable Benefits: safer than stocks, experts choose several companies to invest in

Money Market Funds Special mutual funds that are composed of short-term securities Risks: moderate (not insured by FDIC) Costs: lower interest than CDs, allows you to write checks only if you maintain a high balance in the account Benefits: no fixed interest rates (depends on the health of the economy), higher interest than Savings Accounts

Interest rates have fallen dramatically over the past two decades Interest rates have fallen dramatically over the past two decades. What impact would low interest rates have on the way people invest their money?

Both savers start with $200 and put away $200 a month Both savers start with $200 and put away $200 a month. Both earn 8 percent interest compounded annually. Saver 1 starts at age 18. Saver 2 starts at age 36. The difference in the amount they have at retirement is more than $1 million!

Individual Retirement Accounts investing tool used by individuals to deposit funds that are used after retirement Risks: none (insured by FDIC) Costs: rules and penalties for early withdrawal Benefits: tax deductions for having this account, guaranteed to have money after you retire

401(k) Allows you to set aside a portion of your pay before taxes are withheld for retirement purposes Some employers match every dollar you save up to three percent of your salary Money in a 401(k) will be taxed after you withdraw it years later Typically, contributions are invested in a portfolio of mutual funds, but can include stocks, bonds and other investments

https://www.youtube.com/watch?v=gvZSpET11ZY

Certificates of Deposits Type of Account Definition Risk Costs Benefits Checking Account Savings Account Certificates of Deposits Money Market Funds IRA Accounts Mutual Funds

Certificates of Deposits Types of Financial Accounts Type of Account Definition Risk Costs Benefits Checking Account Savings Account Certificates of Deposits Mutual Funds Money Market Funds IRA Accounts