Chapter 5 Summary - Cengage



Chapter 5 Summary of Learning Objectives

1. List and define the tools of monetary asset management and identify the types of financial services firms that provide those tools.

Maximizing interest earnings and minimizing fees on savings and checking accounts is the goal of monetary asset management. The five primary providers of monetary asset management services include depository institutions (such as banks and credit unions), stock brokerage firms, mutual funds, financial services companies, and insurance companies.

2. Earn interest and pay no or low fees on your checking accounts.

The first tool of monetary asset management is an interest-earning checking account that is used to pay monthly living expenses. When setting set up an account, consider charges, fees, and penalties.

3. Make the best use of the benefits of savings accounts.

Your second tool of monetary asset management is a savings account in which you can place funds not needed for six months to five years into the future. Some longer-term savings instruments such as certificates of deposit allow you to safely earn even higher returns if you are willing to forgo liquidity.

4. Explain the importance of placing excess funds in a money market account.

Your third tool of monetary asset management is a money market account. When your income begins to exceed expenses on a regular basis, it is wise to move excess funds into such an account, which typically pays a higher interest rate. The funds can be left in the account while you consider other investment options. Money market accounts include super NOW accounts, money market deposit accounts, money market mutual funds, and asset management accounts.

5. Describe electronic money management, including your legal protections.

Electronic money management occurs whenever banking transactions are conducted via computers with out the customer using paper documents. Electronic banking includes the use of automatic teller machines (ATMs), point-of-sale (POS) terminals, debit cards, and stored-value cards. The Electronic Funds Transfer Act protects consumers who use electronic money management.

6. Discuss your personal finances and money management more effectively with loved ones.

Recognize the psychological and emotional aspects of money and identify your own approaches to money. Communicate openly and frequently about money matters by using “I” statements.

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