个人理财 Section 3 (Cash Management) Bank Reconciliation Review.pptVIP

Personal Family Finance Section 3 Cash Management How many of you have checking accounts? Does anyone know what it means to reconcile your account? Do you balance your checking account each month? Why would it be important to reconcile your account each month? Introduction The financial asset that is most commonly owned by most individuals is cash. Yet, most individuals take a passive approach to cash management. They miss the opportunity to manage this critical portion of their financial assets. Wise cash management should consider the following: The quantity of cash to hold In what form to hold cash In which financial institution the cash should be held. Why Hold Cash? Undertake Transactions To make every day purchases, individuals use cash. Generally, individuals keep enough to cover their spending for 1–2 weeks. Emergency Reserves Individuals keep cash to protect them against unexpected events. Financial planners recommend keeping 3–6 months’ after-tax income in reserve. Store of Value Individuals plan ahead by saving for major purchases such as the purchase of a house, car, etc. Fundamental Deposits Fundamental deposits are liquid assets. Liquid assets are those that can be withdrawn easily with no loss in principal. Another characteristic of fundamental deposits is safety. These deposits are generally insured by the federal government up to $100,000 per depositor. Types of fundamental deposits: Checking Regular NOW Accounts Savings Accounts Fundamental Deposits (continued) Checking and NOW Accounts These are used to satisfy transaction needs such as bill payment through the use of a check. Checking accounts do not pay interest on balances in the account. NOW (negotiable order of withdrawal) Account pays interest on balances in the account. When comparing the costs and benefits of checking versus NOW accounts, if the minimum balance is met, the NOW account will generally be the best choice. Fundamental Deposits (continued) Savings Accounts This account has no