7.3 Savings Accounts

Tony has $3,000 saved in a money market account. He just received a birthday gift and is deciding what to do with the money. He has narrowed down his options to either increasing his savings or purchasing a subscription to an online video streaming service. If he chooses the video streaming service, the savings alternative is:

• a form of regret

• an irresistible temptation

• the opportunity cost

• the impulse cost

Tony struggles to save money. He knows it is important, but his immediate needs and wants make it difficult for him not to spend the money he has set aside. Which of the following options would be most effective for him to start building savings?

• giving $20 to his friend Maria each week and ask her to save the money for me

• "hiding" cash in his apartment

• automatically having money deposited into a restricted account each month

• accepting the fact that he probably will not be able to save money

One way to become more motivated to save for emergencies is to:

• consider how the people you love would be affected if you could not pay for an emergency

• rely on others to pay for your emergencies

• withdraw and aggressively investw your current savings so that you will increase your emergency fund savings

• consider that your emergency fund savings balance exceeds the FDIC insurance limits

An effective way to motivate yourself to save involves:

• visualizing where you want to be in the future

• feeling angry whenever you spend money

• using CDs exclusively for emergency

• generalizing your dreams and financial goals

Which of the following is a threat associated with keeping cash at home?

• theft

• lost interest

• no protection against impulse purchases

• loss of interest, theft, and no protection against impulse purchases

All of the following charge a depositor an early withdrawal fee, EXCETP a:

• certificate of deposit

• money market savings account

• dedicated savings account

• all accounts charge an early withdrawal fee

How much of your take-home pay should you try to save?

• 5%

• 10%

• 15%

• 20%

All of the following bank products allow a depositor to make additional contributions to the account, EXCEPT a:

• savings account

• money market savings account

• certificate of deposit

• dedicated savings account

An account that pays greater than savings account interest but limits the number of withdrawals per month is known as a:

• money market savings account

• certificate of deposit

• dedicated savings account

• certificate of deposit and dedicated savings account

Which of the following is a benefit of holding money in a CD for an emergency fund?

• the money cannot be withdrawn without a penalty prior to maturity

• the money could be earning a higher rate of return if it were invested more aggressively

• the money is earning a higher rate of return than a savings account

• there are no benefits in a CD for an emergency fund