1. Saving and Investing
Banking

2. Key Terms
Liquidity
PRINCIPLE
Interest
- Simple and Compound

3. Savings Accounts     Liquid? $ 250,000 $ 250,000 FDIC Insured
Statement
Savings
Passbook
Savings
$ 250,000
$ 250,000
FDIC Insured $
Min. Balance
Usually Not
Usually when over
a specified amount
Interest   
ATM 
Liquid?
YES
YES

4. Certificates of Deposit
Also FDIC Insured - $ 250,000
Minimum: $2,500
Interest - YES
Fixed Term: months (.5 – 10 years) ~
Cashed before maturity date? PENALTY
3 Options when term is up:
~ Cash in your CD for value + interest
~ Go to bank and arrange for new CD
~ Do nothing!
NO!!
LIQUID?

5. Saving and Investing
More Types of Investments

6. Money Market Accounts Resembles statement savings account
Min. balance $1,000 - $2,500
Pays higher interest
Limit 3-6 withdrawals/month
Up to 3 checks per month

7. Mutual Funds Mixture of stocks, bonds & other investments
Three Advantages:
Diversification
Professional Fund Mgt.
Convenience

8. US Government Securities
NOT guaranteed by FDIC
~ still considered LOW RISK – backed by
the US government
IOU from the government
~ uses borrowed money for sponsored
programs

9. Types of Securities I. Savings Bonds (Series EE) D. Availability:
A. Current interest rate – 3.2%
B. Pay ½ of the face value
C. Available in $ 50 – 75 – 100 – 200
500 – 1,000 – 10,000 denominations
D. Availability:
Bank/Credit Union
Payroll Deduction
US Treasury Dept Web
Automatically from
EasySaver Plan
(savings or checking)

10. Types of Securities I. Savings Bonds (Series EE) (cont.)
Maturity 20 years for bonds after June ‘03
Will gain interest until its 30th year
Must keep for at least 1 year
Penalty for under 5 years – 3 months interest
After 30th year – roll over to Series HH
Max. value of bonds per year - $30,000
Interest is compounded semi-annually

11. Types of Securities I. Savings Bonds (Series EE) (cont.) Advantages:
Exempt from state/local taxes
Easy to redeem - local banks
Can be replaced
Exempt from federal tax if used for edu.
Disadvantages:
Cannot transfer or sell
Agents must be authorized by Treasury Dept.
Federal tax – if not used for edu.

12. Types of Securities II. Savings Bonds (Series I)
Much the same as Series EE
Interest rate – 6.73%
Unlike Series EE, you pay face value

13. Types of Securities III. Savings Bonds (Series HH) Pay face value
Interest payment direct deposited into
checking or savings every 6 months, or until
maturity or redemption
1.5% interest rate
Minimum $500
Can ONLY get in exchange for mature
Series EE bonds
Term 6 months – 20 years

14. Types of Securities IV. Treasury Securities
Used to pay off government debt
Not FDIC insured – but backed by full faith of
the US government
Liquid – easy to sell for cash

15. Types of Securities Treasury Bills (T-Bills)
Mature in 1 year or less from issue date
Bought for less than par (face) value
Interest = par value – purchased value

16. Types of Securities Treasury Notes and Treasury Bonds
~ Fixed interest every six months until maturity
Difference between Notes and Bonds:
Treasury Notes – mature in 1-10 years
Treasury Bonds – mature in 10+

17. Types of Securities Treasury Bonds ~ IOU from the issuer
~ unlike stocks, no ownership privileges
Secured and Unsecured bonds
Three types of bonds:
Corporate Bonds
Municipal Bonds
Convertible Bonds