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Bennie Waller [email protected] 434-395-2046 Longwood University 201 High Street Farmville, VA 23901. Managing cash (near cash) assets involves liquidity choices. Liquidity is the ability of assets to be easily converted to cash

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Bennie Waller

[email protected]

434-395-2046

Longwood University201 High StreetFarmville, VA 23901


  • Managing cash (near cash) assets involves liquidity choices.

  • Liquidity is the ability of assets to be easily converted to cash

  • For example, holding cash as an asset provides a larger degree of liquidity, however little to no return. Conversely holding long-term assets such as stocks or real estate provide larger expected returns but significantly less liquidity.

  • Pay yourself first (automatic savings).

  • The earlier you start, the faster you will accumulate wealth.


  • Savings Accounts – are very liquid, safe and earn some interest. However, most require minimum holding periods to earn interest, have minimum balances and pay a very low rate.

  • CDs – very liquid and safe, however have penalties for early withdrawal and have minimum deposit amounts.

  • Treasury bills (3-12 months) – very safe, exempt from taxes however with low rate of return.

  • Savings Bonds – safe, tax-free with no fees; low liquidity long maturities with semi-annual compounding.

  • NOW accounts – pays interest but requires a minimum.

  • MMDA – provides variables rate that fluctuates with market, safe but does requires minimum


  • “Banks” or depository financial institutions provide traditional checking and savings accounts and offer a wide variety of financial services.

  • Credit unions – established by organizations and open only to members of that organization. Services are similar to commercial banks but often offer more competitive rates.


Non-deposit-type financial institutions have traditional checking and savings more recently begun to offer similar services as banks, while banks have begun to offer services traditionally provided by non-deposit institutions (e.g., securities purchases).

Thus, over the past two decades, traditional lines between the two types of financial institutions have blurred considerably.

  • Mutual funds –

  • Stock brokerage firm –

  • Insurance companies –


  • Consider these issues; traditional checking and savings

    • Cost – fees, rates, minimum balances

    • Convenience – locations, ATMs

    • Consideration – importance of personal attention

    • Safety - FDIC

  • Balancing your checking account:

    • Keep track of every transaction

    • Compare monthly statement with register, then reconcile register balance with bank balance.


  • Access to your accounts to: traditional checking and savings

    • check balances, transfer funds, and pay bills.

    • view your financial information 24/7

    • Via the internet, a mobile phone, or other electronic device.

  • Allows you to choose an internet-only bank.

  • Allows for more efficient record keeping (Mint/Quicken)


  • Allow you access the money in your accounts electronically and limits the need to carry cash.

  • Looks like a credit card but acts like a checking account. That is you must have the money in your account to make transactions.

  • Check card blocking policies.

  • Financial reform

    • Overdraft fees (must opt-in)

    • Over the limit transactions



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