Managing Your Cash

Cash Management$The daily routine of handling

money to take care of individual or family needs.

Cash Management

Cash Management

Effective cash management includes having available money for:

$Living expenses;$Emergencies;$Savings;$Investing.

Cash Management Tool

Five types of cash management tools: Checking Account Savings Account Money Market Deposit Account Certificate of Deposit Savings Bond

Checking Account$ Tool used to transfer funds deposited into an

account to make a cash purchase.

$ Checking accounts may be non-interest or interest earning.

$ Features may include: Minimum balance requirements; Charge transaction fees; Limited number of checks

written monthly. Reduces the need to carry large amounts of

cash.

Checking Account

Savings Account

Savings Account$ Account to hold money not spent on

consumption.$ Have a lower interest rate than other

cash management tools

Money Market Deposit Account

Money Market Deposit Account$ A combination savings/investment

plan in which money is used to purchase safe, liquid, securities minimum balance requirement tiered interest rates- amount of interest

earned depends on the account balance$For example: a balance of $10,000

will earn a higher interest rate than a balance of $2,500.

Money Market Deposit Account continued

$ limited to three to six transactions each month

$ Features of may include: Minimum amount required to open the

account often $1,000

balance falls below a specified amount earn a lower interest rate

Certificate of Deposit (CD)

$ Certificate of Deposit (CD) A deposit that earns a fixed interest rate

for a specific length of time Interest rates vary depending upon

specified time length.$The longer the length, the higher the

interest rate.

Certificate of Deposit continued

$ Features may include: Range from seven days to eight years in

length; Minimum deposits range from $100-

$100,000; If funds are withdrawn before the

expiration date, penalties are assessed; Different types to fit your needs

Standard- fixed Flexible- can add money and withdraw

on occasion free of charge

Savings Bonds

• A registered, non-transferable bond issued and backed by the U.S. Government

• "the All American Investment" • easy way to save money safely • get a good market return• Rates change every May and November

based on either current market rates or inflation.

Savings Bond• Can buy from bank, through payroll

deductions or from Federal Reserve• Two types• I Bond- • state and local income tax exempt • federal income tax can be deferred • If cashes in before five years • subject to a 3-month earnings

penalty• earn interest for as long as 30 years

Savings Bonds

• Series EE Savings Bond• Earn fixed rate of return• Buy for 50% of face value• Minimum $50 bond- Max $10,000 per year• $50 bond

– Buy for $25– When mature you receive $50

• 20 years to maturity

– Government tracks bond by SS#

Cash Management Tools

ToolAverage Interest Earned

Purchase Place

Special Features

Checking Account

1.5% Commercial Banks, Savings & Loan Associations, Credit Union

Can be used in place of cash, funds can be easily accessed

Savings Account

2.3% Commercial Banks, Savings & Loan Associations, Credit Union

Easily accessed, temporary holding place for funds

Money Market Account

2.6% Commercial Banks, Savings & Loan Associations, Credit Union

Minimum balance, limited transactions, tiered interest rates

Certificate of Deposit

4.0% - 5.4%, depending on the length of deposit

Commercial Banks, other institutions which accept deposits for a fixed period

Penalties for early withdrawals, no deposits or withdrawals are made after initial investmentSavings Bonds 4.0% - 5.4%,

depending on the length of bond

Commercial Banks, Credit Unions, employer payroll deduction plans

Tax advantages, a loan to the federal government

Liquidity How quickly and easily an asset can be

converted into cash. $ Investors should:

Invest in both liquid and non-liquid tools. Liquid assets are important for

emergencies when cash must be quickly accessed.

$ Cash management tools are protected by the U.S. Government against loss.

Liquidity

Liquidity

Checking Account Most Liquid

Savings Account

Money Market Deposit AccountCertificate of Deposit

Savings Bond Least Liquid

Low Risk

These five cash management tools are low risk: Insures the funds so the consumer

does not lose money on the investment.

However, they have lower interest rates.$Causes low returns

The End