Based on the information provided, I would recommend that Mariah open a 2-year certificate of deposit (CD) for each daughter. A CD would allow her funds to grow with interest over the 2 years until she needs to access the money to help pay for her daughters' college costs. The fixed, guaranteed rate of return and lack of penalties for early withdrawal make a CD a good fit for Mariah's goal.

1. Savings Tools
Take Charge of Your Finances
Family Economics & Financial Education
Personal Finance 8.01 Savins &
Investments

2. 1.14.2.G1
To Develop a
Savings Fund:
Determine how much money is
appropriate for a savings fund
Determine which savings
tools in which to place money
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

3. 1.14.2.G1
Savings Tools
$ Savings tools are secure and liquid accounts
offered by depository institutions assisting in the
management of a savings fund
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

4. 1.14.2.G1
Savings Tools
$ Determine which savings tools are appropriate to assist in the
attainment of personal financial goals
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

5. 1.14.2.G1
Low Risk
$ Savings tools are very secure
$ Most depository institutions offering savings tools
are backed by government insurance
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

6. 1.14.2.G1
FDIC
The most common type of government
insurance is offered by the Federal Deposit
Insurance Corporation (FDIC )
FDIC is a federal government
agency insuring certain depository
institutions against loss
If a depository institution covered by FDIC
fails, FDIC will restore the lost funds up to
$250,000 per account
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

7. 1.14.2.G1
Checking Account
$ DEFINITION $ INTEREST
 Tool used to transfer  May be non-interest
funds deposited into or interest earning
an account to make a  Interest rate is usually
cash purchase the lowest available
for the savings tools
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

8. 1.14.2.G1
Checking
Account
$ ACCESSIBILITY
 Most liquid of all the savings tools
$ Funds are easily accessed by:
 Checks
 Automated teller machines (ATMs)
 Debit cards
 Telephone
 Internet
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

9. 1.14.2.G1
Checking Account
$ FEATURES
 Can have minimum balance requirements
 Can charge transaction fees
 Can have a limit on the number of checks written
monthly
 Reduces the need to carry large amounts of cash
Before opening a checking
account, learn all of the
requirements and restrictions.
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

10. 1.14.2.G1
Savings Account
$ DEFINITION $ INTEREST
 Account to hold  Interest earning
money not spent on  Lower interest rates
consumption compared to the other
savings tools except
checking accounts
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

11. 1.14.2.G1
Savings Account
$ ACCESSIBILITY
 More liquid than all savings tools except a
checking account
$ Funds may be accessed or transferred between
accounts through:
 Automated teller machines
 Telephones
 Internet
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

12. 1.14.2.G1
Savings Account
$ FEATURES
 Allows for frequent deposits or withdrawals
 Easily accessible
 Money storage for emergencies or daily living
 Available at depository institutions
 May require a minimum balance or have a limited
number of withdrawals per month
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

13. 1.14.2.G1
Money Market
Deposit Account
$ DEFINITION $ government
 segment of the financial market insured account
offered at most
in which financial instruments
depository
with high liquidity and very short
institutions
maturities are traded
 Used as a means for borrowing
and lending in the short term,
from several days to just under a
year.
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

14. 1.14.2.G1
Money Market
Deposit Account
$ INTEREST
 Minimum balance requirement with tiered interest
rates
$ The amount of interest earned depends on the account
balance
$ For example: a balance of $10,000
will earn a higher interest rate than a
balance of $2,500
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

15. 1.14.2.G1
Money Market
Deposit Account
$ ACCESSIBILITY
 Less liquid than checking and savings accounts
$ Accessibility is limited to a certain number of
transactions per month (usually 3-6)
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

16. 1.14.2.G1
Money Market
Deposit Account
$ FEATURES
 Minimum amount required to open the account,
often $1,000
 If the average monthly balance falls below a
specified amount, the entire account will earn a
lower interest rate
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

17. 1.14.2.G1
Certificate of
Deposit
$ DEFINITION $ INTEREST
 An insured interest  Varies depending upon
earning savings tool that the time length and
allows restricted access to amount of money
the funds deposited
 Deposits have to be held $ The longer the period of
for a certain length of time, the higher the
interest rate
time
$ Usually 7 days to 8 years
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

18. 1.14.2.G1
Certificates of
Deposit
$ Contract for specific time
period
$ If funds withdrawn before
MATURITY DATE,
penalty is deducted from
your money
$ Earn higher rate because
bank can lend money to
borrowers for longer
period and earn more
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

19. 1.14.2.G1
Certificate of
Deposit
$ ACCESSIBILITY
 Less liquid than
checking, savings, and
money market deposit
accounts
 Large fees (penalties) are
assessed if funds are
withdrawn before the
end of the designated
time period
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

20. 1.14.2.G1
Certificate of
Deposit
$ FEATURES
 Minimum deposits range from $100-$250,000
 Low risk and no fees if funds are held for the
designated time period
 7 days minimum, 8 years maximum
Common maturity terms
 3-6-9-12-1824-36-48-60 months
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

21. 1.14.2.G1
Savings Bond
$ DEFINITION
$ Bonds are purchased for discount of 50% of
the face value from the U.S. Government
$ Loan given to a corporation or the government
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

22. 1.14.2.G1
Savings Bond
$ INTEREST
 Can be redeemed once the investment doubles
 Maturity date- when bond is redeemed
 Amount of time it takes to double in value
depends on the current interest rate offered
$ Invest $50 for a $100 savings bond
$ The bond can be redeemed once the investment
doubles to reach $100
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

23. 1.14.2.G1
Savings Bond
$ ACCESSIBILITY
 Least liquid of all the savings tools
$ Access to funds is restricted
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

24. 1.14.2.G1
Savings Bond
$ FEATURES
 Safe, secure, and affordable
 Purchased for $25.00 - $10,000.00
 Taxes
$ Interest earned on a bond is tax deferred until redeemed
$ If the bond is used to pay for college, the interest it earned
will be tax exempt when redeemed (if invested in 529 plan*
see next slide)
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

25. 1.14.2.G1
529 college
plans
$ A 529 Plan is an education savings plan operated
by a state or educational institution designed to
help families set aside funds for future college costs.
It is named after Section 529 of the
Internal Revenue Code which created these types of
savings plans in 1996.
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

26. 1.14.2.G1
Liquidity
Checking Account
Most Lowest
Liquid Interest
Savings Account
Money Market Deposit Account
Certificate of Deposit
Least Highest
Liquid Savings Bond Interest
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

27. 1.14.2.G1
Choosing a
Savings Tool
$ Different savings tools can be utilized to assist in
reaching personal financial goals
$ Higher interest rates are a trade-off for lower
liquidity
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

28. 1.14.2.G1
Choosing a
Savings Tool
$ When and how often access is needed to funds
helps determine which savings tool to use
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 28
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

29. 1.14.2.G1
Choosing a
Savings Tool
$ By understanding the features of different savings
tools, an individual can choose which tools will help
them reach their financial goals.
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 29
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

30. 1.14.2.G1
Depository
Institutions
$ Features of savings tools vary between different
depository institutions
 Interest rates
 Accessibility options
 Fees
 Penalties
 Minimum balance requirements
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 30
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

31. 1.14.2.G1
Depository
Institutions
$ Research and compare savings tools at different
depository institutions in order to find the best
option
$ Not limited to one depository institution
 Can have different savings tools at different depository
institutions
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 31
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

32. 1.14.2.G1
Savings Tools
Scenarios
$ Read each Savings Tool Scenario
$ Discuss which savings tool would be recommended
for each scenario
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 32
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

33. 1.14.2.G1
Savings Tools
Scenario #1
Mariah has twin daughters that will be graduating
from high school in two years. They both have a
goal to attend college after graduation, and Mariah
wants to help them reach this goal by paying for
some of their schooling. She has $2,000 for each
daughter that she would like to save and then be
able to access in two years. Which savings tool
would you recommend Mariah utilize and why?
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 33
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

34. 1.14.2.G1
Savings Tools
Scenario #2
Conner and Lisa were recently married and
purchased a new house. They received $1,000 as a
wedding present from Lisa’s parents. They want to
use this money to buy new furniture for their house
in six months. Which savings tool would you
recommend Conner and Lisa utilize and why?
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 34
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

35. 1.14.2.G1
Savings Tools
Scenario #3
Sean is a high school student that just received his
first paycheck from his new part-time job at the
local grocery store. He currently has no expenses to
pay, and his goal is to save every paycheck from his
job to buy a new car in two years. He needs to find
a savings tool that will help him reach his financial
goal. Which savings tool would you recommend
Sean utilize and why?
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 35
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

36. 1.14.2.G1
Savings Tools
Scenario #4
Brittany recently moved into her first apartment.
Before, she was living with her parents and had very
few expenses to keep track of. Now that she has to
pay rent and utilities for her apartment, she needs to
find a savings tool that will help her manage her
money and ensure she can pay her bills every
month. Which savings tool would you recommend
Brittany utilize and why?
$ © Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 36
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

37. 1.14.2.G1
Savings Tools
Scenario #5
Bryan has a goal to become financially secure by
developing an emergency fund. He has been saving
twenty percent of his net income for the past year
and now has $2,000. He plans to maintain this
balance and only use this money for emergency
expenses. Which savings tool would you
recommend Bryan utilize and why?
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 37
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

38. 1.14.2.G1
Savings Tools
Scenario #6
Paul and Grace want to purchase a house in two
years. They want to begin saving money to use for
the down payment on a home. They are able to save
$300 per month and need to know which savings
tool would be the best option for them to put their
money in. Which savings tool would you
recommend Paul and Grace utilize and why?
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 38
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

39. 1.14.2.G1
Summary
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 39
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

40. 1.14.2.G1
Summary
$ Savings tools are very secure
$ Most depository institutions offering savings tools
are backed by FDIC insurance
$ Different savings tools can be utilized to assist in
reaching personal financial goals
$ Features of savings tools vary between depository
institutions
© Family Economics & Financial Education – May 2010 – Saving Unit – Savings Tools – Slide 40
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona