Reasons we save... Emergencies Purchases Wealth building (future)

Bank Accounts Offer safety and security Sometimes offer interest on deposits

What’s in it for the bank? Banks make money by borrowing then lending money Take in money from depositors (you) Then use that money to make loans, on which they charge interest

Liquidity Liquidity—how quickly you can convert some- thing to cash without signifi- cant loss of value Interest rates depend on the liquidity the account offers Accounts offering a high degree of liquidity usually have the lowest interest rates Quick access to your money limits the ability to make money on your money

Checking Accounts Demand deposit— money put into a checking account Basic checking accounts are most liquid type of bank account Can access your money instantly by check, ATM, debit card, etc. Very liquid = does not pay interest

Interest Bearing Savings Accounts Savings accounts— accounts on which you can withdraw money at any time, do not provide check- writing services May pay a little interest Very liquid, can withdraw money at any time Often used to save money for specific purposes

Certificates of Deposits (CDs) Certificate of deposit (CD)— contract between a person and a bank that states a length of time that the person will leave a certain amount of money deposited there CDs specify a minimum amount invested and have a specific maturity date, typically: –One month –Three months –Six months –One year –Three years –Five years

Certificates of Deposits (CDs) CDs offer a higher interest rate than savings accounts Can access your money prior to maturity, but will pay a penalty for early withdrawal Consider CDs only when you know that you will not need the money until after the CD matures

Money Market Deposit Account Money market deposit account— must maintain a minimum balance, no maturity date, pay interest, and offer limited check- writing privileges Some of the features of checking accounts, some of savings accounts Most impose fees if your balance falls below the minimum or if you write more checks than allowed Pay a higher rate of interest