Cash, cars

Cash, cars - CASH MANAGEMENT: BEATING THE BANKS ARE 142:...

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CASH MANAGEMENT: BEATING THE BANKS ARE 142: Personal Finance Professor Heather Rose UC Davis, Fall 2009 Lecture 5 1 Goals ± Understand how banks work (and how they can work for you) ± Understand difference between annual interest rates and APY (annual percentage yield) ± Determine best place to put cash you need in short term 2
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Importance of Cash Accounts ± Meet immediate expense (rent, credit card bills, utilities, tuition) ± Need a place to deposit earned income ± Direct deposits from jobs ± Safe place to save for short-term and medium-term goals ± Gifts, vacations, weddings 3 How Do Banks Work? ± You deposit money there ± They earn some fees from you (sometimes) ± They pay you a little interest (e.g., 1%) ± They loan it to homebuyers, business and charge a lot more in interest (e.g., 5% ) ± Inertia ± Get you while you are young ± Once you automate, it’s hard to leave 4
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Options for Cash ± Types of accounts ± Checking accounts ± Savings accounts or money market deposit account ± CDs (certificate of deposit) ± Investment vehicles (money market mutual funds, T-Bills, Bonds) ± Interest rates ± Internet Only, Brick and Mortar, Credit Unions ± Online banks have less overhead, so can sometimes pay you better interest rates ± Annual interest rate vs. Annual Percentage Yield (APY) ± Questions to consider when choosing accounts
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Cash, cars - CASH MANAGEMENT: BEATING THE BANKS ARE 142:...

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