 BUILDING BLOCKS STUDENT HANDOUT Options for storing your savings Here are some common ways you can store your savings along with a few general benefits and risks of the different options.

As you review each option, consider how safe your money would be, what it costs to store your money in this way, and how easily you can get your money when you need it (known as liquidity).

Savings option Benefits Risks

§ May offer higher rate of interest § Often requires a Certificate of deposit (CD) than a savings or money market minimum deposit account A savings tool from a bank or § Can’t access your § credit union that has a fixed Designed to hold the funds for money without three to 12 months or longer penalty until the maturity date and a fixed CD matures interest rate § May offer higher interest rates for higher deposits or longer terms

§ You can usually have your § May have fees paycheck automatically deposited § May have overdraft in your account—this is called fees if you spend “direct deposit” more than what’s in §  Checking account Use ATM (automated teller your account machine) card, debit card, § An account at a bank or credit May pay fees to or write checks to access or withdraw money union (sometimes called a share spend your money draft account at a credit union) from ATM (usually § that allows you to make deposits, The bank or credit union provides free to use bank’s or pay bills, and make withdrawals a record of your transactions— credit union’s ATMs) monitoring this information helps § May require parent Some banks and credit you manage your money or guardian to be unions offer special accounts, § Money is protected (up to on the account if for example, a student $250,000) through the Federal under 18 checking account Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) in the event the bank or credit union goes out of business

BUILDING BLOCKS STUDENT HANDOUT Options for storing your savings 1 of 3 Winter 2019 Savings option Benefits Risks

§ No minimum balance § Can be lost, stolen, § or destroyed in a fire  Friends and family Someone else can help you manage your savings or natural disaster Having a friend or family § Risk to your money member keep your money and relationship if for you this person betrays your trust

§ Easily add to your stash § May be tempting to § Access your money at any time spend your cash  Home § Can be lost, stolen, Storing money in your house or destroyed in a fire or natural disaster § No interest earned

§ May have higher interest rate than § Often requires a  Money market savngs account minimum balance deposit account § Often pays higher interest rate to open the account Federally insured account at a than savings account and avoid fees bank or credit union that offers § § Can write a check from Limited to a higher rate of interest than this account writing checks or a savings account, allows for a withdrawing funds limited number of transactions up to six times monthly, and may require a per month minimum deposit or minimum § No ATM or account balance. debit card

§ § Prepaid card Easy to access your money May lose money to § fees to activate card, A card on which you load money Card is convenient. It is a debit card use card, or load in advance to spend. While a more money (may § prepaid card might look like Don’t need a bank or credit cost more than a a debit or credit card, it’s very union account bank account) different. An account debit § Many prepaid cards don’t allow § May not have card is linked to your checking you to spend more than you have account. When you use a credit same features or in the account – that means no protections as a card, you’re borrowing money. overdraft fees A prepaid card is not linked to a bank account for checking account nor is it a form theft or errors of borrowing money. In most (review the card’s cases, you can’t spend more policies) money than you have already loaded onto your prepaid card.

BUILDING BLOCKS STUDENT HANDOUT Options for storing your savings 2 of 3 Savings option Benefits Risks

§ Money earns interest § Limit on transfers § Use ATM (automated teller may make it harder machine) card or debit card to to use your money access or spend your money § May need a Savings account § Monitoring your record of minimum balance to An account at a bank or credit transactions helps you avoid a fee union (sometimes called a manage spending share savings account at a § credit union) used to set aside Money is protected (up to money and that pays you $250,000) through Federal interest Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) in the event the bank or credit union goes out of business

§ Issued by the U.S. government § Hard to get your § Money earns interest money quickly § § Digital, so can’t be lost or Loses some interest destroyed (record maintained by if you cash the bond U.S. savings bonds U.S. Treasury) before it matures Interest-bearing savings security § Taxed on the interest issued by the U.S. government you earn (some for a set amount of money savings bonds have no federal tax when used to pay for qualified higher education expenses)

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