BANKING

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Money Market

An account with high minimum deposit that pays higher interest rate. It's a hybrid savings and checking, allows you to three checks a year.

Characteristics of Different Accounts

Checking Accounts

an account that allows you to write checks and pay bills online. It has overdraft protection, auto bill paying, and is mostly free. Disadvantages that checking accounts might have are non automatic overdraft protection, annual fees, and zero interest accounts.

Savings Accounts

An bank account that pays Interest, helps you save for goals, Insured for protection. Disadvantages include minimum balance is required, allowed only six withdrawals each month, and Interest equals taxable income.

Certificate of Deposit

An account where you can put money away for an certain amount of time. The longer you have it set up, the higher the interest rate you can build and earn.

Banks vs. Credit Unions

  • For Profit

  • Lower Interest on savings accounts

  • Allows anyone to open an account

  • FDIC Insurance ( 250k )

  • Charges more interest for loans

  • Accessible

  • Shareholder Owned

  • Might be lots of fees

  • Non Profit

  • Higher Interest on savings accounts

  • Have to be eligible for a membership

  • NCUA Insurance ( 250k )

  • Charges less interest for loans

  • Less Accessible

  • Member Owned

  • Fewer Fees

The Importance of Saving

Simple vs Compound Interest

Simple Interest is the percentage added to the principal. Isn't used often.

Compound Interest is one earns Interest on Interest. Is more common.

Time Value of Money

TVM is a concept that describes money at the present time is worth more than the sum in the future due to its potential earning capacity. This concept provides money can earn interest, which also describes any amount of money is worth more sooner it's received.