Savings Accounts
A type of bank account that earns interest on the money deposited.
What is a savings account?
A savings product with a fixed interest rate and fixed term length.
What is a Certificate of Deposit (CD)?
Money market accounts often offer higher interest rates and may require higher minimum balances.
What distinguishes a money market account from a regular savings account?
A loan made by an investor to a borrower, typically corporate or governmental.
What is a bond?
An investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks or bonds.
What is a mutual fund?
A share in the ownership of a company.
What is a stock?
What is the Rule of 72?
It provides a safe place to store money while earning interest.
What is one benefit of using a savings account?
From a few months to several years.
How long do you typically have to keep money in a CD?
Yes, some money market accounts allow limited check-writing.
Can you write checks from a money market account?
The bond has reached the end of its term, and the principal is returned to the investor.
What does it mean when a bond matures?
By spreading investments across various assets, reducing the impact of any single asset's poor performance.
How does diversification in mutual funds reduce risk?
You own a small part of the company and may earn dividends.
What does it mean to own a share of stock?
Interest paid on the prinicipal plus prior interest
What is compounding interest?
Usually as a percentage of the balance over time.
How is interest typically calculated on a savings account?
You may face penalties or lose some of the interest earned.
What happens if you withdraw money from a CD before it matures?
A higher minimum deposit compared to regular savings accounts.
What is typically a requirement for opening a money market account?
Corporate bonds are issued by companies, while government bonds are issued by governments.
What is the difference between a corporate bond and a government bond?
Management fees, sales loads, and other operating expenses.
What are the fees typically associated with mutual funds?
A collection of markets where stocks are bought and sold.
What is the stock market?
When you must choose the next best financial alternative
What is opportunity cost?
A government agency that insures deposits in banks, protecting customers' money.
What is the Federal Deposit Insurance Corporation (FDIC)?
CDs often offer higher interest rates for locking in funds for a longer period.
Why might someone choose a CD over a regular savings account?
It usually offers higher interest rates.
How does the interest on a money market account compare to that of a savings account?
To earn interest income and diversify their investment portfolio.
Why do investors buy bonds?
They get professional management and diversification without needing to pick individual stocks or bonds.
How can investors benefit from mutual funds?
Company performance, market conditions, and economic factors.
What factors can influence the price of a stock?
Buy low, sell high and earn dividends
How do investors make money in the stock market?
It earns interest and is safer from theft or loss.
Why might someone choose a savings account over keeping cash at home?
CDs generally have higher interest rates than regular savings accounts.
What is the typical interest rate trend for CDs compared to savings accounts?
They may have higher fees and less liquidity compared to savings accounts.
What are the risks associated with money market accounts?
When interest rates rise, bond prices typically fall, and vice versa.
What is the relationship between bond prices and interest rates?
Actively managed funds have managers making investment decisions, while passively managed funds track a specific index.
What is the difference between an actively managed mutual fund and a passively managed fund?
When you own a variety of stocks to minimize your risk of losing money
What is diversification?
Amount, interest, and time
What three factors affect saving money?