Disadvantages administrative fees minimum initial

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Disadvantages: Administrative fees, minimum initial investment, not insured, minimum checks. 18
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Cash Management Alternatives Asset Management Account —a comprehensive financial services package (checking account, credit card, MMFs, etc.) offered by a brokerage firm. Advantages: Monthly statements, coordination of money management, checks, high return, convenient. Disadvantages: Costly, minimum initial investment, not insured. 19
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Cash Management Alternatives U.S. Treasury bills, or T-bills —short-term debt issued by the federal government with maturities from 3-12 months. Advantages: Risk-free, exempt from state and local taxes, federal tax vary with current rates Disadvantages: Low rate of return 20
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Cash Management Alternatives U.S. Savings Bonds —Series EE and I bonds are safe, low risk savings products issued by the Treasury with low denominations. Advantages: Safe, affordable, no taxes, convenient, redeem at any bank, no commissions or fees. Disadvantages: Low liquidity, long maturity, semi-annual compounding. 21
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Comparing Cash Management Alternatives Comparable Interest Rates—use the annual percentage yield (APY) to easily compare. Tax Considerations—taxes affect the real rate of return on investments. Safety—some deposits are federally insured FDIC deposits at commercial banks NCUA deposits at credit unions MMMF—not insured but diversified 22
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Establishing and Using a Checking Account Choosing a financial institution, consider: Cost Convenience Consideration Safety Balancing your checking account: Keep track of every transaction Compare monthly statement with register, then reconcile register balance with bank balance. 24
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Other Types of Checks Cashier’s Check Certified Check Money Order Traveler’s Checks 29
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Electronic Funds Transfer (EFT) Any financial transaction that takes place electronically. Advantages: Transactions take place immediately Don’t have to carry cash or write a check Pay all kinds of bills 30
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Electronic Funds Transfer Examples: ATM transactions Debit card transactions Smart cards Stored Value Cards 31
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