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Section 5.

2 Notes TYPES OF SAVINGS PLANS Certificate of Deposit- a time deposit that requires you to leave your money in a financial institution for a set amount of time. From a month to over five years Usually pay a penalty if you take the money out before the maturity date. Deposit a certain minimum amount to buy a CD

Money Market Accounts- a savings account in which the interest rate varies from month to month. Usually higher than that of a regular savings account Requires a higher minimum balance- usually $1000 Can write checks U.S. Savings Bonds- Series EE Interest on Series EE Bonds is exempt from, or free from state and local taxes Continues to earn interest for 30 years if you do not cash it in- the longer you hold it the more its worth. EVALUATING SAVINGS PLANS Rate of return-the percentage of increase in the value of your savings from earned interest. Divide the total interest earned by the amount she had deposited Compounding-the process in which interest is earned on both the principal (the amount deposited) and on any previously earned interest. First interest on the principal is computed and added to the principal. The next time interest is computed the new larger balance is used. The more frequently your balance is compounded, the greater your yield, or rate of return. Truth in Savings Act-requires financial institutions to inform you of the terms and conditions of all savings accounts (fees, interest rates, and the APY) Annual Percentage Yield (APY)- tells you how much interest a financial institution would pay on a $100 deposit for one year. Since it is stated as % and as an annual rate, it enables you to compare savings plans that have different rates and compounding frequencies.

TYPES OF CHECKING ACCOUNTS Regular Checking Accounts- usually dont require a minimum balance Activity Accounts-charged a fee for each check you write and sometimes for each deposit. No minimum balance. Interest Earning Checking Accounts- cross between checking and savings EVALUATING CHECKING ACCOUNTS Overdraft protection-an automatic loan made to you if you write a check for money than you have in your account.

USING A CHECKING ACCOUNT Stop-payment order-a request that an institution not cash a particular check. Fees can range from $10-$20. Endorsement- is the signature of the payee, the party to whom the check has been written. Bank reconciliation- is a report that accounts for the differences between the bank statement and your checkbook balance. Called Balancing Your Checkbook 1. Compare the checks you wrote to those listed on the bank statement as paid List all outstanding checks- checks that have not cleared. Subtract the total amount of outstanding checks from the balance on the statement. 2. Determine any recent deposits not on the bank statement. Add these amounts to the deposits to the bank statement. 3. Subtract fees and charges listed on the statement from your checkbook balance. 4. Add any interest earned to your checkbook balance.