Savings Account

Savings Account

An interest-bearing deposit account that places limitations on the number of money withdrawls allowed

Savings accounts are intended for saving money for ______ _____ like buying a car or paying for college. Can function as emergency fund. FDIC insursed up to legal limit

future needs

_______ savers with ______ on deposits

rewards, interest

Differences from checking accounts

checking accounts offer high liquidity but low interest

savings accounts provide reduced liquidity but higher interest

Savings accounts are allowed up to __ withdrawls per month; fees may apply for exceeding this limit

6

Rarely come with ____ or ____, limiting acces

checks, debit cards

By ________ ________, banks can assume those funds will stay in the bank longer, enabling them to make loans with these funds

limiting accessibility

Money Market Accounts (MMAs)

A deposit account offered by financial institutions that typically offer higher interest rates than traditional savings accounts, while offering some of the check-writing and debit card access features of checking accounts, but subject to certain restrictions and usually higher minimum balance requirements.

MMAs are a hybrid between a ________ and _______ account

checking, savings

MMAs offer higher _______ ____ than traditional savings accounts

interest rates

MMAs provide some _____ ______ and debit card capabilities with restrictions

check-writing

MMAs typically require _____ minimum balances

higher

Certificate of Deposit (CDs)

A fixed-amount and fixed-term financial product offered by banks that pays interest on deposits, and charges penalties for early withdrawals.

CDs offer _____ interest rates in exchange for comiting a specific deposit amount for a SET PERIOD

higher

(CDs) ______ for early withdraws, FDIC insured, certainty and predictability for both saver and bank ex. retirement

penalties

Economic conditions

Interest rates rise during economic growth and fall in a sluggish economy

banks balance supply and demand for funds by adjusting rates

Central Bank Policies

Federal reserve sets monetary policies impacting interest rates

Bank Liquidity Needs

Banks offer higher rates to attract deposits when needing more reserves

Lower rates when ample reserves are available

Competitive Environments

Competition among banks affects interest rates

banks might raise rates to attract customers or match competitors

Inflation expectations

banks adjust rates based on expected inflation to maintain attractive real returns on deposits