CHAPTER 34 USING YOUR SAVINGS PLAN REGULAR SAVINGS

CHAPTER 34 USING YOUR SAVINGS PLAN

REGULAR SAVINGS ACCOUNT • OVER 70% OF U. S. CONSUMERS HAVE A SAVINGS ACCOUNT • SAVINGS ACCOUNTS HAVE HIGH LIQUIDITY • ABLE TO DEPOSIT AND WITHDRAW MONEY EASILY

MONEY MARKET ACCOUNTS • ALLOWS CONSUMERS TO EARN HIGHER YIELDS • VARIABLE RATES BASED ON RATES PAID TO HOLDERS OF SHORT-TERM GOVERNMENT DEBT • USUALLY HAVE LARGE MINIMUM BALANCE • BANKS ABLE TO USE MONEY DEPOSITED AND EARN HIGHER INTEREST

CERTIFICATES OF DEPOSIT • REQUIRES MINIMUM DEPOSIT, FOR A SPECIFIC PERIOD OF TIME, AND PENALTIES FOR EARLY WITHDRAWAL • PAYS HIGHER INTEREST RATES

EVALUATING WHERE TO PUT YOUR SAVINGS • HOW SAFE IS YOUR MONEY WITH INSTITUTION? • HOW MUCH INTEREST DO YOU EARN? • HOW FREQUENTLY IS INTEREST COMPOUNDED AND ADDED TO YOUR ACCOUNT? • WHAT SERVICES ARE OFFERED THAT ARE IMPORTANT TO YOU? • DOES INSTITUTION OFFER HELP IN DECISION MAKING

EVALUATING WHERE TO PUT YOUR SAVINGS • WHAT ARE THE BUSINESS HOURS? • IS ELECTRONIC BANKING AVAILABLE? • IS THE BANK CONVENIENTLY LOCATED? • MAKE SURE INSTITUTION SHOULD MAKE SURE DEPOSITS ARE FEDERALLY INSURED

SAVING FOR RETIREMENT • INDIVIDUAL RETIREMENT ACCOUNT (IRA)--TAX SHELTERED ALLOWING PEOPLE TO INVEST $2, 000 ANNUALLY AND DEFER TAXES UNTIL RETIRING • TRADITIONAL IRAs ARE TAX DEDUCTIBLE AND INVESTMENT GROWS TAX DEFERRED • ROTH IRA--CONTRIBUTIONS NOT DEDUCTIBLE HOWEVER NO TAXES PAID ON GAINS OR WHEN WITHDRAWN

FYI • SHOP AROUND FOR CD RATES THEY WILL VARY • CREDIT UNION SAVINGS ACCOUNT IS CALLED A “SHARE ACCOUNT” • MONEY MARKET ACCOUNTS RANGED FROM 2 -12% IN RECENT DECADES • BUY CDs IF INTEREST RATES ARE EXPECTED TO DROP TO LOCK IN HIGHER RATE