Chapter 5: Managing Checking Savings Accounts Garman/Forgue Personal Finance Ninth Edition PPT slide...

Chapter 5:Managing Checking Savings Accounts

Garman/Forgue

Personal FinanceNinth Edition

PPT slide program prepared by Amy Forgue and Ray Forgue.

Copyright ©Houghton Mifflin Company. All rights reserved. 5 - 2

Learning Objectives

1.List and define the tools of monetary asset management and identify the types of financial services firms that provide those tools.

2.Earn interest and pay no or low fees on your checking accounts.

3.Make the best use of the benefits of savings accounts.


Learning Objectives

4. Explain the importance of placing excess funds in a money market account.

5. Describe electronic money management, including your legal protections.

6. Discuss your personal finances and money management more effectively with loved ones.


Monetary Asset Management

• What is monetary asset management?

• Monetary assets = Cash



The Three Tools of Monetary Asset Management:

1. Low-cost, interest-earning checking accounts

2. Interest-earning savings accounts

3. Money market accounts



• Who provides monetary asset management services?

• Financial Services Industry: Companies that provide monetary asset management and other services.


Depository Institutions

• Commercial Banks– Insured by Bank Insurance Fund (or BIF)

of the FDIC

• Savings Banks (or S&Ls)– Insured by Savings Association

Insurance Fund (or SAIF) of the FDIC


Depository Institutions

• Mutual Savings Banks (or MSB)

• Credit Union (or CU)– Insured by the National Credit Union

Share Insurance Fund (or NCUSIF)


Deposit Insurance

• Deposit Insurance is a real plus.

• The maximum insurance on all single-ownership (individual) accounts (held in you name only) is $100,000.

• The maximum insurance on all joint accounts (accounts held with other individuals) is $100,000.


Deposit Insurance

• The maximum insurance on all retirement accounts is $200,000.

• A maximum of $100,000 in insurance per beneficiary is payable on “death accounts”.


Other Financial Service Providers

• Mutual Funds

• Stock Brokerage Firms

• Insurance Companies


Tool #1: Interest-Earning Checking Accounts

• Checking account

• Debit (or Check) Card


Tool #1: Interest-Earning Checking Accounts

• Types of checking accounts:– Interest-Earning Checking Account [or

Negotiable Order of Withdrawal (NOW) Account]

– Tiered Interest

– Lifeline Banking Account


When You Write a Check

• Cleared

• Substitute Check

• Stop-Payment Order


Payment Instruments for Special Needs

• Traveler’s Checks

• Money Orders

• Certified Check

• Cashier’s Check


Endorse Your Checks Properly

• Bank Endorsement

• Special Endorsement

• Restrictive Endorsement


Protect Yourself from Bad Check Fees

• Automatic Funds Transfer Agreement

• Automatic Overdraft Loan Agreement

• Bounce Protection Agreement


Tool #2: Savings Accounts

• Savings Account

• Time Deposits



• Statement Savings Account (or Passbook Savings Account): Permit frequent deposits or withdrawals of funds.



• Certificate of Deposit (or CD)– Variable-Rate Certificates of Deposit (or

Adjustable-Rate CDs)

– Brokered Certificates of Deposit



• How to save:– “Pay Yourself First”– Saving is not glamorous; slow and steady

wins the race!– Emergency fund– Other savings goals can be broken down

into short-term goals and monthly savings amounts.


Savings Account Interest

• Amount of Money on Deposit

• Method of Determining the Balance

• Interest Rate Applied– Annual Percentage Yield (APY)


Savings Account Interest

• Frequency of compounding

• Grace Period


Tax Consequences of Saving for Children’s College

• Put money in a Section 529 college savings plan.

• Put money in a Coverdell Education Savings Account (ESA).

• Put money for college in a custodial account.

• Put money in a Roth IRA.


Tool #3: Money Market Accounts

• Money market account

• Super NOW Accounts

• Money market deposit accounts

• Money market mutual funds


Asset Management Accounts

• Central Asset Account (or AMA)

• Sweeps


How Ownership of Accounts Is Established

• Individual Account

• Payable at Death Designation

• Joint Account


How Ownership of Accounts Is Established

• Joint Tenancy with Right of Survivorship

• Tenancy in Common

• Tenancy by the Entirety


Electronic Money Management

• Electronic Funds Transfers (or EFTs)

• ATM Transaction Fee: Payments levied each time an ATM is used.


Consumer Protection Regulations

• Electronic Funds Transfer Act

• Disclosure Statement

• Periodic Statements

• Fixing errors

• Protection for lost cards


The Psychology of Money Management

• Managing money and making financial decisions are different.

• People ascribe strong emotions to money.


How to Talk About Financial Matters• Get to Know Yourself

• Focus on Commonalties

• Learn to Manage Financial

• Disagreements

• Use Positive “I” Statements

• Be Honest and Talk Regularly


How To Develop Money Sense in Children

• Give an Allowance

• Encourage Work

• Teach Them to Make Good Choices through Increasingly Complex Activities

• Talk About Family Finances with Children

• Be a Role Model


Top 3 Financial Missteps in Managing Checking and Savings Accounts

People slip up in building and maintaining good credit when they do the following:

1. Paying high fees unnecessarily.

2. Keeping most of your excess funds in you checking account where it earns you very little interest.

3. Failing to reconcile your accounts on a regular basis.


Good Money Habits in Managing Checking and Savings Accounts

• Use a free, interest-earning checking account for your day-to-day spending needs.

• Use high-interest savings accounts for funds you will not need for six months to about five years in the future.

• Use investments for needs that will not occur until five or more years in the future.


Good Money Habits in Managing Checking and Savings Accounts

• Maintain an emergency fund sufficient to cover three months of expenses.

• Buy certificates of deposit when saved funds will not be needed until a specific future date.

• Reconcile your account statements monthly.

Chapter 5: Managing Checking Savings Accounts Garman/Forgue Personal Finance Ninth Edition PPT slide...

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