Vocab
A fee paid to you for keeping your money in a savings account
Interest
Give an example of a short term savings goal.
A new phone
New clothes
New shoes
Monthly
When you put money in a savings account, it earns interest. After you deposit the money to your bank, the bank lends out the money. The banks make money lending your money so they give you interest.
What kind of savings account is this? Traditional, online, CD, Money Market?
Traditional
Direct deposit usually refers to your _________ sending your _________ electronically to your bank account.
Employer; paycheck
Rule of budgeting where you divide a percentage of your income between needs, wants, and savings
50-30-20 rule
True or false: An effective strategy for saving money is to wait until the end of the month and save whatever is left in your checking account.
False
Save a certain percentage of each paycheck and deposit it directly into a savings account
Which of the following transactions will REDUCE your checking account balance immediately?
a. writing a monthly rent check you will mail the next day
b. using your debit card to pay for groceries
c. using your credit card to pay for textbooks
d. depositing a check at a local bank branch
Using your debit card to pay for groceries
A savings account at this bank is typically able to offer higher interest rates because they lack the overhead that physical banks do; there is no physical bank branch to visit.
What kind of savings account is this? Traditional, online, CD, Money Market?
Online
Charged when checks or electronic payments cause your account to go below $0
This is only charged if no other account protections are in place
The average fee is around $25.
All transactions will be declined
NSF Fees
A bank product that earns interest on a lump-sum deposit that is untouched for a predetermined period of time
Certificate of Deposit/CD
When is the best time to start saving for retirement?
a. right after you pay off your student loans
b. once you are completely debt-free
c. as soon as you have your first full-time job
d. at age 45 so you have exactly 20 years to save
As soon as you have your first full time job
Sarah gets a text alert from the bank that her account balance has dropped below $100 after a series of $20 ATM withdrawals. She has not used her ATM in over a week and wonders what she should do. What would you recommend?
Contact her bank immediately
Which of the following is TRUE when comparing savings accounts and certificates of deposit?
A. Savings accounts are FDIC insured while certificates of deposit are not
B. Savings accounts allow you to access your money at all times while certificates of deposit require your money to be left alone for a set period of time
C. Savings accounts typically have a higher interest rate than certificates of deposit
D.Both savings accounts and certificates of deposit allow you to deposit money at any time
B
A person-to-person payment app could be used in each of the following scenarios EXCEPT...
A. Jason pays his neighbor $200 for breaking his window with a baseball
B. Regina writes a check to cover the entire month's rent, and her roommates pay her back for their share.
C. Angela's volleyball coach pays the team's registration fee for a tournament, and she and the other players pay her back.
D. Milo pays her local pizza place for pizza she ordered online.
D
A loan banks offer to their customers when they try to withdraw more funds than they have in their account, usually for a fee and with interest
Overdraft Protection
Jasmine saved $1000 from her summer job. What kind of savings account should she use if she does not need access to the money for a number of years and wants to earn the highest interest rate possible?
Certificate of Deposit/CD
FDIC insurance is coverage that protects your bank account up to what amount?
$250,000
These types of accounts serve as the middle ground between checking accounts and bonds. They place limits on withdrawals and have higher minimum balances. They are able to offer higher interest rates because they invest in higher yield instruments such as commercial bonds and CDs.
What kind of savings account is this? Traditional, online, CD, Money Market?
Money Market
All of the following are downsides of being unbanked EXCEPT:
A. lack of access to credit
B. lost time paying bills
C. lack of fees associated with traditional banks
D. difficulty making cashless purchases
C
Government agency that insures customer deposits if a bank fails up to $250,000 per individual depositor
Federal Deposit Insurance Corporation (FDIC)
Jenna wants to have an emergency fund to cover 4 months of her expenses. Her monthly gross pay is $4000 and her monthly expenses are $2000. If she plans to save 8% of her gross pay each month, how long will it take her to build her emergency fund?
Emergency fund: 2000 x 4 = $8000
8% of 4000 = $320
$8000/$320 = 25 months
If you agree to overdraft protection, what will happen if you try and overspend your balance?
You will likely be charged an overdraft fee for one or more of the transactions and also will need to repay the bank for the amount overdrawn
Tyreke has $5,000 to put into an account that earns compound interest. Which of the following is the BEST advice you can offer so that he can maximize interest?
A. It’s ok to open an account with a low interest rates as long as you deposit your money early
B. Deposit your money as early as possible in an account with the highest interest rate possible
C. Wait for interest rates to rise above 5%, otherwise compounding doesn’t have any effect
D. Compound interest will not have any effect at such a low dollar amount. Find different opportunities to earn interest on your savings.
B
Banks may charge you an excessive transactions fee if...
You make more than the allowed number of withdrawals and transfers per month in a savings account
BONUS: How many transactions are allowed?