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Bennie Waller [email protected] 434-395-2046 Longwood University 201 High Street Farmville, VA 23901

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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

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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.
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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
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“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.
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Non-deposit-type financial institutions have 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 –
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Consider these issues;

    • 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.
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Access to your accounts to:

    • 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)
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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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Banks are run by humans and computers. Both are capable of error. Always keep a record!

  • Avoid human errors such as those involved with deposits at ATMs.
  • Report immediately. Call or write the bank.
  • By law, write within 60 days of receiving your statement.
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