Personal Finance: Account Types

Types of Accounts and Investments

• Higher interest rates than checking accounts

• May have minimum account balance requirements

​Savings Accounts

• Typically no or very low interest rates

• Normally used for daily spending and expenses

​Checking Accounts

Demand Deposit Accounts
- have access to your money (can 'demand' it) at any point

Multiple Choice

What is the primary benefit of a checking account?

• Offers investment opportunities

• Earns high interest rates

• Allows for long-term savings

• Provides access to money for everyday needs

Multiple Choice

What is the main difference between checking and savings accounts?

• Checking accounts offer limited access to avoid impulse buys

• Savings accounts are designed for spending

• Checking accounts pay higher interest rates

• Savings accounts pay interest on balances

Multiple Choice

Should you have both checking and savings accounts?

• No, only one account is necessary

• Yes, but only if you have a high income

• Yes, because they serve different purposes

• No, it's better to have multiple checking accounts

• Accounts of depositers pooled then invested

• Rates flucuate based on market, higher risk than savings accounts

• No access to money for a set time

​Money Market Mutual Fund

• Pay a standard interest rate but money must be left in account for a specified time

• Maturity date is when money can be withdrawn

​Certificate of Deposit

Other Account Types

• Typically retirement accounts, partially funded by employers and uses pre-taxed income

• Penalties for withdrawing before retirement age

401K

• Low risk investment that pays a given interest amount after a specified time period

• Like a small loan from you to the government or a business

• Interest rates and lengths vary

​Bonds

Other Account Types

Multiple Choice

With the certificate of deposit, you get less interest than a regular savings account.

• True

• False

Multiple Choice

What are some risks associated with investing in a Certificate of Deposit?

• High returns, no penalties for early withdrawal, no inflation risk

• Low returns, penalties for early withdrawal, inflation risk

• Guaranteed returns, no penalties for early withdrawal, market risk

• Variable returns, no penalties for early withdrawal, interest rate risk

Match

Match the following

• Stock

• Bond

• Mutual Fund

• Capital Gains

• Dividend

small ownership in company

Essentially an IOU

Consists of stocks and bonds

Profit from an investment

portion profits sent to shareholder

• small ownership in company

• Essentially an IOU

• Consists of stocks and bonds

• Profit from an investment

• portion profits sent to shareholder

Multiple Choice

An actively managed mutual fund…

• Generally has lower fees than a passively managed index fund

• Is managed by a fund manager who charges a fee

• Always performs better than an index fund

• Is a mix of two types of stocks and two types of bonds to diversify your portfolio

Multiple Choice

What are mutual funds?

• Accounts offered by banks to save money with fixed interest rates.

• Funds managed by professional fund managers to invest pooled money from investors.

• Government-issued bonds to support public funding.

• Private investment opportunities for accredited investors only.

Multiple Choice

How are contributions made to a Company Sponsored 401k plan?

• By direct cash payments from the employee.

• Through deductions from the employer's profits.

• By contributing portions of your paycheck to the account.

• Through yearly tax returns.

Multiple Choice

What might an employer do with your contribution to a 401k plan?

• Take a percentage as a service fee.

• MATCH your contribution.

• Invest it in the company's stock exclusively.

• Return it at the end of the fiscal year.

When choosing a financial institution consider...

• The four Ps

  • Products - what do they offer

  • Price - interest rates, minimums, etc

  • Place - how easy will it be to access your money?

  • People - how easy will it be to get help with what you need?