Where to Put Your Money

By: Diana Bronson, Victoria Verzi, James Payne, & Matthew Fluke

Commercial Banks Offer checking and savings accounts and a

range of financial products and services Only institution that offers demand

accounts (non-interest-paying accounts) Ex.

o Bank of America

Internet Banks Entirely online commercial banks Used for their convenience, lower service

fees, and higher interest on accounts Ex.

o Ally Banko Discover Banko USAA

Community Banks Gains funds from and lends to community

where it operates Ex.

o Old Florida National Bank• Boone High School

• Ad in the Yearbook, Newspaper, Sports Program, along with merchandise

https://www.oldflorida.com/about_us/why_bank_local/

Real World Applications

Savings and Loan Association (S&L)

Takes savings from deposits and put it into mortgage loans for it members

Also offers checking and saving accounts Not very common in today’s society

Credit Unions Nonprofit, member owned institution that

provides a full range of financial products and services

Provides the highest return because they don’t receive fees like the other institutions (nonprofit)

Members belong to common occupation, religious, fraternal order, or residential area.o Central Florida Educators – meant for teacherso McCoy Federal Credit Union – meant for airport

employeeso Fairwinds – meant for the Navy

Credit Unions (cont.) Many credit unions have opened up to people

who live, work, worship, and volunteer in a area or has family who do so.

Make sure you stop by the CFE Boone Branch and open an account

Credit Unions

Brochure created by Diana Bronson

Checking Account Only offered at commercial banks Insured up to $250,000 per banking institution by

Federal Deposit Insurance Corporation (FDIC) Called a demand deposit

o Bank is required to give the money to the depositor whenever they wish to withdrawal it.

Normally doesn’t earn interest Minimum balance required

Savings Account Called time deposits

o the money that is deposited is expected to remain in the account longer than a checking account

Offered at o Commercial Banko Credit Uniono Savings and Loans o Savings Bank

Higher interest than checking account Used to accumulate money for future goal or

unexpected expense Insured by the FDIC up to $250,000

N.O.W. Account Negotiable order of withdrawal accounts Checking Accounts that offer interest

o Start paying interest at a certain balance All depository institutions are allowed to offer

them No legal minimum balance Insured by the FDIC up to $250,000

Money Market Deposit Accounts

Use checks and ATM’s to access account o Limited number of free checks & transfers

• Not seen as a disadvantage because most think of them as savings

Compete with money market mutual fundso More conviento Safer- protected by FDIC

Offered at o Banks o Depository institutions

Certificates of Deposit (CDs)

Savings instrument that earns interesto People put their money into CDs because

• Convienent • Federally insured• Attractive return on money

must remain on deposit anywhere between 7 days to 7 or more years

Penalty for withdrawing money before maturity dateo Normally requires you to forfeit a certain amount of

interest Longer time + more money = higher interest

Any Questions? Post your question to the Help Desk where one of

us can help you http://floridastudentsaves.com/help_desk.aspx

Checking Account Only offered at commercial banks Insured up to $250,000 per banking institution by

Federal Deposit Insurance Corporation (FDIC) Called a demand deposit

o Bank is required to give the money to the depositor whenever they wish to withdrawal it.

Normally doesn’t earn interest Minimum balance required

Savings Account Called time deposits

o the money that is deposited is expected to remain in the account longer than a checking account

Offered at o Commercial Banko Credit Uniono Savings and Loans o Savings Bank

Higher interest than checking account Used to accumulate money for future goal or

unexpected expense

N.O.W. Account Negotiable order of withdrawal accounts Checking Accounts that offer interest

o Start paying interest at a certain balance All depository institutions are allowed to offer

them No legal minimum balance

Money Market Deposit Accounts

Use checks and ATM’s to access account o Limited number of free checks & transfers

• Not seen as a disadvantage because most think of them as savings

Compete with money market mutual fundso More conviento Safer- protected by FDIC

Offered at o Banks o Depository institutions

Certificates of Deposit (CDs)

Savings instrument that earns interesto People put their money into CDs because

• Convienent • Federally insured• Attractive return on money

must remain on deposit anywhere between 7 days to 7 or more years

Penalty for withdrawing money before maturity dateo Normally requires you to forfeit a certain amount of

interest Longer time + more money = higher interest

Risk vs. ReturnThe key thing to understand is that the rate you

get on a particular security or account are all determined by the risk associated with it.

Remember: Securities are non-insured investments, which are more risky

Risk and Return plays a part in every investment and every place you will put your money. Ever.

Well how does money have risk? Will it go away somehow?

To a certain extent, yes, it can go away.

Let’s give an example:For example, if you put your money into an account with SAVES Co. SAVES Co. will use that money to offer loans to other people to help them by cars or houses, SAVES Co. then charges them more money than you gave to them. That is how banks make their money. But let’s assume the people SAVES Co. has given money to don’t pay them back and they keep giving loans. In that instance the bank would become insolvent or, unable to pay its debts.

Your rate will be determined by your access to cash and how likely it is it might go away.

The higher the risk with an investment, the more money you’ll make.

Treasury Securities Treasuries are sold by the U.S. government and are used as

a standard risk free rate throughout the economy. Treasury securities will play a key role in your financial plan There are three types of Treasury Securities and they are

all different periods of time.o T-Bills- T-Bills last less than a year, they pay the lowest interest of

all the three types of securities because they are the least riskyo T-Notes- T-Notes last between 1-10 years and have a median level

of risko T-Bonds- T-Bonds last between 10-30 years, although the 30 year

bonds are no longer sold o Treasury securities are considered Highly Liquid, or easy to turn

back into cash through their saleo The longer the period on a Treasury, or any security, the higher

your rate will be.

Series EE Bonds

Series EE bonds are sold by the U.S. government, much like Treasury Securities

Series EE bonds don’t get to be resold to anyone, if your name is on the bond it’s yours.

Series EE bonds can be redeemed after just one year of owning one, however you can keep them up to 20 years, all the while gaining interest!

EE bonds are ultra safe, they have almost no risk, like Treasuries.