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Questions and Answers
What types of insurance products do insurance companies provide?
What types of insurance products do insurance companies provide?
What may influence the interest earned on an interest-earning checking account?
What may influence the interest earned on an interest-earning checking account?
What is a common way to access funds in a checking account aside from writing checks?
What is a common way to access funds in a checking account aside from writing checks?
What is tiered interest in the context of checking accounts?
What is tiered interest in the context of checking accounts?
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What happens to funds when a debit card is used for a transaction?
What happens to funds when a debit card is used for a transaction?
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Which of the following is NOT a type of depository institution?
Which of the following is NOT a type of depository institution?
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What primary service do credit unions provide?
What primary service do credit unions provide?
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What defines a commercial bank?
What defines a commercial bank?
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Which financial institution specializes in trading stocks, bonds, and other investments?
Which financial institution specializes in trading stocks, bonds, and other investments?
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What is the main focus of mutual funds?
What is the main focus of mutual funds?
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What is the primary goal of monetary asset management?
What is the primary goal of monetary asset management?
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Which of the following best describes liquidity in the context of monetary assets?
Which of the following best describes liquidity in the context of monetary assets?
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Which tool is NOT mentioned as part of monetary asset management?
Which tool is NOT mentioned as part of monetary asset management?
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What is a characteristic of money market accounts as described?
What is a characteristic of money market accounts as described?
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What constitutes the largest component of a typical college student's net worth?
What constitutes the largest component of a typical college student's net worth?
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What type of account is primarily used for ongoing living expenses?
What type of account is primarily used for ongoing living expenses?
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Which option best describes monetary asset management?
Which option best describes monetary asset management?
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Which of the following actions is NOT one of the three ways people use monetary assets?
Which of the following actions is NOT one of the three ways people use monetary assets?
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What happens if a minimum-balance requirement is not met in an interest-earning checking account?
What happens if a minimum-balance requirement is not met in an interest-earning checking account?
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Which type of account requires maintaining a specified amount to avoid fees?
Which type of account requires maintaining a specified amount to avoid fees?
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What is a characteristic of a fixed-time deposit?
What is a characteristic of a fixed-time deposit?
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What type of savings account allows frequent deposits and withdrawals with no fees?
What type of savings account allows frequent deposits and withdrawals with no fees?
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What should you consider when selecting an interest-earning checking account?
What should you consider when selecting an interest-earning checking account?
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Which account requires that funds remain for an extended period, usually specified?
Which account requires that funds remain for an extended period, usually specified?
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What happens in an average-balance account when the average daily balance falls below the required level?
What happens in an average-balance account when the average daily balance falls below the required level?
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What is one possible downside of an interest-earning checking account with a minimum-balance requirement?
What is one possible downside of an interest-earning checking account with a minimum-balance requirement?
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What is recommended for dual-earning couples to manage their finances effectively?
What is recommended for dual-earning couples to manage their finances effectively?
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What is a primary source of disagreement in managing family money?
What is a primary source of disagreement in managing family money?
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Which approach is recommended for effective communication regarding financial matters?
Which approach is recommended for effective communication regarding financial matters?
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What should couples do if they have financial disagreements?
What should couples do if they have financial disagreements?
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What is the first step in learning to discuss financial matters with others?
What is the first step in learning to discuss financial matters with others?
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In the case study, what are Mark and Trina planning to do with Mark's rent money?
In the case study, what are Mark and Trina planning to do with Mark's rent money?
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What role does honesty play in achieving consensus about financial matters?
What role does honesty play in achieving consensus about financial matters?
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What financial planning step involves discussing insurance and estate planning?
What financial planning step involves discussing insurance and estate planning?
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What is the primary purpose of the periodic statement sent by financial institutions?
What is the primary purpose of the periodic statement sent by financial institutions?
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Which of the following is NOT a recommended practice for reducing fraudulent charges?
Which of the following is NOT a recommended practice for reducing fraudulent charges?
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Which factor can lead to tension in personal relationships according to the content?
Which factor can lead to tension in personal relationships according to the content?
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What is one consequence of one partner bringing significant debt into a relationship?
What is one consequence of one partner bringing significant debt into a relationship?
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Managing money encompasses which of the following tasks?
Managing money encompasses which of the following tasks?
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What action should you take if you notice unfamiliar charges on your statement?
What action should you take if you notice unfamiliar charges on your statement?
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Which of these suggestions is the least effective for protecting your privacy during online banking?
Which of these suggestions is the least effective for protecting your privacy during online banking?
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What often leads to financial trouble in couples?
What often leads to financial trouble in couples?
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Study Notes
Managing Checking and Savings Accounts
- Financial success depends on managing monetary assets (cash and low-risk, near-cash items easily converted to cash).
- Monetary assets are the largest component of net worth for typical college students.
- People use monetary assets in three ways: spend, save, or invest.
What Is Monetary Asset Management?
- Monetary asset management is handling monetary assets (cash, checking, savings, CDs, and money market accounts).
- The goal is to maximize interest earnings and minimize fees while keeping funds available for living expenses, emergencies, and investments.
- Successful management allows earning interest while maintaining liquidity and safety.
- Liquidity refers to how quickly an asset can be converted to cash.
The Three Tools of Monetary Asset Management
- Low-cost, interest-earning checking accounts: For daily living expenses.
- Interest-earning savings accounts: For future expenditures, savings, and investments.
- Money market accounts: Hybrid accounts with checking and savings features, offering higher interest rates.
Who Provides Monetary Asset Management Services?
- Financial service providers offer checking, savings, investment, and financial planning services.
- Companies like: depository institutions, stock brokerage firms, mutual funds, and insurance companies.
Depository Institutions
- Organizations licensed to take deposits and make loans.
- Examples include:
- Commercial banks: Offer numerous consumer services.
- Savings banks: Primarily for accepting savings and providing loans.
- Credit unions: Non-profit, member-owned institutions.
Other Financial Service Providers
- Mutual funds: Investment companies pooling money to invest in diverse portfolios.
- Stock brokerage firms: Licensed financial institutions buying and selling stocks, bonds, and other investments, and providing investor advice.
- Insurance companies: Offer property, liability, health, and life insurance products.
Tool #1-Interest-Earning Checking Accounts
- Checking accounts let you write checks against deposited funds.
- Debit cards are typically used nowadays for access, instead of checks.
- Funds can be accessed through ATMs or POS terminals.
- Bank-to-bank transfers can also be made via QR codes or banking apps.
- Checking accounts may or may not pay interest.
- Interest-paying accounts typically have low fees.
- Some accounts offer tiered interest rates based on account balances.
- Many accounts require a minimum balance to avoid monthly fees.
- Interest earned is usually not paid if the balance falls below the minimum.
- The best accounts balance the benefits of interest against monthly fees.
- Accounts often require a minimum balance and maintaining an average daily balance.
Tool #2-Savings Accounts
- Savings accounts provide a readily accessible source of emergency cash and a temporary holding place for funds.
- Funds in savings accounts are considered time deposits.
- Some savings accounts are fixed-time deposits (certificates of deposit (CDs)).
- CDs specify a deposit period (from weeks to years) and pay a fixed interest rate when they mature.
- Statement savings accounts typically permit frequent deposits and withdrawals without fees, but may require minimum balances.
- Savings are best done by "paying yourself first".
- It is wise to build a three-month emergency fund (70% of monthly income) that can cover living expenses.
Tool #3-Money Market Accounts
- Money market accounts are interest-earning accounts with relatively high interest (than savings accounts).
- They provide features of checking and savings tools.
- They usually have higher interest rates than typical checking or savings accounts.
Electronic Money Management
- Modern money management uses electronic systems.
- Three methods: paper, plastic, and neither.
- Paper: traditional cash and check systems.
- Plastic: use of debit cards and other electronic payment methods.
- Neither: use of computer/phone to access accounts.
- Electronic Funds Transfers(EFTs) shift funds electronically.
- Costs may be associated with ATM use or other electronic banking.
- Fees may also be assessed for using online banking, bill paying, and verifying account balances.
- Periodic statements display details for transactions to aid in protecting customer accounts.
- Tips for preventing fraudulent activities: do not bank on wireless systems away from home, do not open unsolicited emails, always log off and close browsers or clear history, and regularly change passwords.
The Psychology of Money Management
- Money conflicts can cause relationship tension.
- Shared decision-making is crucial when setting goals.
- Financial chores (budget, shopping) should be agreed upon beforehand.
- Each partner should maintain some personal finances separately.
Case Study
- Mark and Trina are planning to save for a down payment on a house after marrying.
- They have their own apartments and employment.
- Mark has a checking account and three savings accounts in different institutions.
- Trina has a paycheck directly deposited and a savings account, money market account at a stock brokerage firm, and an individual retirement account.
- Questions presented in the case study involve where to access services, best use of checking/savings accounts, money market account considerations, electronic banking, and discussion strategies.
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Description
Test your knowledge on managing monetary assets including checking and savings accounts. Understand the importance of liquidity, interest earnings, and minimizing fees for financial success. This quiz will help reinforce key concepts in monetary asset management.
