Savings ToolsTake Charge of Your Finances

Family Economics & Financial Education

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

To Develop a Savings Fund:

Determine how much money is appropriate for a savings fund

Determine which savings tools in which to place money

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools

$ Savings tools are secure and liquid accounts offered by depository institutions assisting in the management of a savings fund

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools

$ Determine which savings tools are appropriate to assist in the attainment of personal financial goals

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Low Risk

$ Savings tools are very secure$ Most depository institutions offering

savings tools are backed by government insurance

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

FDIC

The most common type of government insurance is offered by the Federal Deposit Insurance Corporation (FDIC)

FDIC is a federal government agency insuring certain depository institutions against lossIf a depository institution covered

by FDIC fails, FDIC will restore the lost funds up to $250,000 per account

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$DEFINITION Tool used to

transfer funds deposited into an account to make a cash purchase

$ INTEREST May be non-

interest or interest earning

Interest rate is usually the lowest available for the savings tools

Checking Account

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$ACCESSIBILITY Most liquid of all the savings tools

$Funds are easily accessed by: Checks Automated teller machines (ATMs) Debit cards Telephone Internet

Checking Account

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$FEATURES Can have minimum balance requirements Can charge transaction fees Can have a limit on the number of checks

written monthly Reduces the need to carry large amounts

of cash

Checking Account

Before opening a checking account, learn all of the requirements

and restrictions.

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$DEFINITION Account to hold

money not spent on consumption

$INTEREST Interest earning Lower interest

rates compared to the other savings tools except checking accounts

Savings Account

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Account

$ACCESSIBILITY More liquid than all savings tools

except a checking account$Funds may be accessed or transferred

between accounts through: Automated teller machines Telephones Internet

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Account

$FEATURES Allows for frequent deposits or

withdrawals Easily accessible Money storage for emergencies or daily

living Available at depository institutions May require a minimum balance or have a

limited number of withdrawals per month

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$DEFINITION A government insured account

offered at most depository institutions

Money Market Deposit Account

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Money Market Deposit Account

$INTEREST Minimum balance requirement with

tiered interest rates$The 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

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Money Market Deposit Account

$ACCESSIBILITY Less liquid than checking and

savings accounts$Accessibility is limited to a certain

number of transactions per month (usually 3-6)

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Money Market Deposit Account

$FEATURES Minimum amount required to open

the account, often $1,000 If the average monthly balance

falls below a specified amount, the entire account will earn a lower interest rate

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

$DEFINITION An insured interest

earning savings tool that allows restricted access to the funds

Deposits have to be held for a certain length of time$Usually 7 days to 8

years

$INTEREST Varies depending

upon the time length and amount of money deposited$The longer the

period of time, the higher the interest rate

Certificate of Deposit

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Certificate of Deposit

$ACCESSIBILITY Less liquid than checking, savings,

and money market deposit accounts$Large fees are assessed if funds are

withdrawn before the end of the designated time period

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Certificate of Deposit

$FEATURES Minimum deposits range from

$100-$250,000 Low risk and no fees if funds are

held for the designated time period

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Bond

$DEFINITION Discount bond purchased for 50%

of the face value from the U.S. Government$Similar to a loan but is given to a

company or the government

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Bond

$INTEREST Can be redeemed once the

investment doubles Amount of time it takes to double in

value depends on the current interest rate offered$Invest $50 for a $100 savings bond$The bond can be redeemed once the

investment doubles to reach $100

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Bond

$ACCESSIBILITY Least liquid of all the savings tools

$Access to funds is restricted

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Bond

$FEATURES Safe, secure, and affordable Purchased for $25.00 - $10,000.00 Taxes

$ Interest earned on a bond is tax exempt until redeemed

$ If the bond is used to pay for college, the interest it earned will be tax exempt when redeemed

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Liquidity

Checking Account

Savings Account

Money Market Deposit Account

Certificate of Deposit

Savings Bond

Most Liquid

Least Liquid

Lowest Interest

Highest Interest

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Choosing a Savings Tool

$ Different savings tools can be utilized to assist in reaching personal financial goals

$ Higher interest rates are a trade-off for lower liquidity

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Choosing a Savings Tool

$ When and how often access is needed to funds helps determine which savings tool to use

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Choosing a Savings Tool

$ By understanding the features of different savings tools, an individual can choose which tools will help them reach their financial goals.

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Depository Institutions

$ Features of savings tools vary between different depository institutions Interest rates Accessibility options Fees Penalties Minimum balance requirements

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Depository Institutions

$ Research and compare savings tools at different depository institutions in order to find the best option

$ Not limited to one depository institution Can have different savings tools at

different depository institutions

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 30Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenarios

$ Read each Savings Tool Scenario$ Discuss which savings tool would be

recommended for each scenario

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 31Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #1

Mariah has twin daughters that will be graduating from high school in two years.

They both have a goal to attend college after graduation, and Mariah wants to help them reach this goal by paying for some of their

schooling. She has $2,000 for each daughter that she would like to save and then be able to access in two years. Which savings tool would you recommend Mariah utilize and

why?

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 32Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #2

Conner and Lisa were recently married and purchased a new house. They received

$1,000 as a wedding present from Lisa’s parents. They want to use this money to buy new furniture for their house in six months. Which savings tool would you recommend

Conner and Lisa utilize and why?

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 33Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #3

Sean is a high school student that just received his first paycheck from his new

part-time job at the local grocery store. He currently has no expenses to pay, and his

goal is to save every paycheck from his job to buy a new car in two years. He needs to find a savings tool that will help him reach his financial goal. Which savings tool would

you recommend Sean utilize and why?

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 34Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #4

Brittany recently moved into her first apartment. Before, she was living with her

parents and had very few expenses to keep track of. Now that she has to pay rent and

utilities for her apartment, she needs to find a savings tool that will help her manage her

money and ensure she can pay her bills every month. Which savings tool would you recommend Brittany utilize and why?

$ 

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 35Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #5

Bryan has a goal to become financially secure by developing an emergency fund. He has been saving twenty percent of his net income for the past year and now has $2,000. He plans to maintain this balance and only use this money for emergency expenses. Which savings tool would you

recommend Bryan utilize and why?

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 36Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Savings Tools Scenario #6

Paul and Grace want to purchase a house in two years. They want to begin saving money

to use for the down payment on a home. They are able to save $300 per month and need to know which savings tool would be

the best option for them to put their money in. Which savings tool would you recommend

Paul and Grace utilize and why?

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 37Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Summary

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© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 38Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences

at the University of Arizona

Summary

$ Savings tools are very secure$ Most depository institutions offering

savings tools are backed by FDIC insurance

$ Different savings tools can be utilized to assist in reaching personal financial goals

$ Features of savings tools vary between depository institutions