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Chapter 5: Managing Your Cash. Explain the importance of effective cash management and list the four tools of cash management. Compare and contrast the primary providers of cash management opportunities in today’s financial services industry.

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objectives
Explain the importance of effective cash management and list the four tools of cash management.

Compare and contrast the primary providers of cash management opportunities in today’s financial services industry.

Understand the uses of electronic funds transfer and the legal protections available for it.

Understand the criteria for choosing and using various types of checking accounts and the importance of having an interest-earning checking account.

Objectives
objectives1
Identify the potential benefits of opening a savings account as well as key factors to consider when comparing savings account.

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

List the potential benefits of putting money into low-risk, longer-term savings instruments.

Objectives
what is cash management
Maximizing interest earnings

Minimizing fees on all funds kept readily available for living expenses, recurring household expenses, emergencies, and saving and investment opportunities

What is Cash Management?
  • THE TASK OF:
what is cash management1
What is Cash Management?
  • Cash equivalents
  • Liquidity
  • Safety
who provides financial services
Who Provides Financial Services?
  • Banks and depository institutions
  • Mutual funds
  • Stock brokerage firms
  • Financial services companies
electronic funds transfer
Electronic Funds Transfer
  • Debit cards
  • ATMs
  • Point-of-sale terminals
  • Smart card and stored-value cards
  • Pre-authorized deposits and payments
  • Electronic benefits transfer
eft regulations
EFT Regulations
  • Electronic Funds Transfer Act - 1978
  • Regulation E - Federal Reserve Board
  • Disclosure statement
  • Periodic statement
  • Liability for unauthorized use
cash management tools
Cash Management Tools
  • Interest-earning checking accounts
  • Savings accounts
  • Money market accounts
  • Low-risk, long-term savings instruments
checking accounts
Checking Accounts
  • Allows transfer of deposited funds to merchants and service providers, as well as to accounts at other financial institutions.
types of checking accounts
Types of Checking Accounts
  • Demand deposits (traditional)
  • Special checking
  • Regular checking
  • Lifeline banking
  • Interest-earning checking
  • Share draft
checking accounts1
Service fees

Per-check charges

Transaction charges

Account exception fees

Checking Accounts
  • CHARGES, FEES, AND PENALTIES:
ownership rights
Individual account

Joint tenancy

Tenancy in common

Tenancy by the entirety

Minor’s account

Community property

Trust

Ownership Rights
savings
Current income that is not spent on consumption; provides source of emergency funds and/or temporary place for funds in excess of daily living expenses.Savings
  • PAY YOURSELF FIRST!
savings accounts
Statement savings account (passbook)

Time deposits

Fixed-time deposits

Interest savings account

Savings Accounts
money market accounts
Any of a variety of interest-earning accounts that pay relatively high interest rates and offer some limited check-writing privileges.Money Market Accounts
money market accounts1
Money Market Accounts
  • Super NOW Accounts
  • Money Market Deposit Accounts (MMDA)
  • Money Market Mutual Funds
  • Asset Management Accounts (AMA)
low risk long term savings instruments
Low-Risk, Long-Term Savings Instruments
  • Allow even higher returns in exchange for less liquidity (accumulate and transfer from MMA).
low risk long term savings instruments1
Low-Risk, Long-Term Savings Instruments
  • Certificates of Deposit (CDs)
  • U.S. Government Savings Bonds
    • EE (Patriot Bonds)I Bonds
  • College Savings Trust Funds
ee and patriot bonds see savingsbonds com
EE and Patriot Bonds(see SavingsBonds.com)
  • 10 Things You Should Know About the "Patriot Bond"
i bonds see savingsbonds com
I Bonds(see SavingsBonds.com)
  • Current Rate for May 2015 was 1.94%
  • Series I Savings Bonds Rates 2010 – 2014: Nov. 2010 = 0.74%; May 2011 = 4.60%; Nov. 2011 = 3.06%; May 2012 = 2.20%; Nov. 2012 = 1.76%; May 2013 = 1.18%; Nov. 2013 = 1.38%.
  • Denominations Available:  $50 , $75 , $100 , $200 , $500 , $1,000 , $5,000  and $10,000. Series I bonds are issued only in registered form and are not transferable. The bonds may be either in book-entry or definitive form.You can purchase up to $5,000 worth of I Bonds annually (each calendar year). NOTE: You can purchase up to $5,000 in EE Bonds as well, totaling $10,000 max annually in paper bonds as of January 1, 2008. An individual may also purchase $5,000 in ELECTRONIC EE Bonds as well as an additional $5,000 in ELECTRONIC I bonds; for a grand total of $20,000 in savings bonds per calendar year. This number is down from the limit of $60,000, prior to January 1, 2008. I Bonds are an accural type security interest is added to the bond monthly, and paid when a bond is redeemed (cashed). Can be purchased at most local financial institutions, or payroll savings plans. (ie: banks, credit unions and the internet.
  • You cannot exchange I Bonds for HH Bonds.You cannot exchange EE Bonds for I Bonds. (You CAN cash in your EE bonds and use the money to purchase I Bonds, however, the interest earned on the EE Bonds must be reported on your Federal Income Tax return in the year you cash the bonds.)There is a 3 month penalty for cashing in an I Bond before it is five years old.
you can bank from home
You Can BankFrom Home
  • Bank-based programs
  • Bill-paying programs
  • Computer based programs
checks for special needs
Checks forSpecial Needs
  • Traveler’s Check
  • Money Orders
  • Certified Checks
  • Cashier’s Checks
overdraft protection
OverdraftProtection
  • Good faith agreement
  • Insufficient funds
  • Automatic funds transfer
  • Automatic overdraft loan
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