Copyright Goodheart-Willcox Co., Inc.
220 Unit 3 Investigating Career Pathways in Human Services
schedule and make a payment. Online bill pay is a service many fi nancial
institutions offer.
Today, written checks are almost a thing of the past. Most money
transactions can now be done electronically. Many employers offer their
employees the option of direct deposit. Direct deposit is an electronic
payment from the employer’s account to the employee’s bank account.
With direct deposit and online bill pay, no checks are written. Nothing
is mailed. Even if a check is received, many fi nancial institutions offer
applications that allow photo deposit of checks into a personal checking
or savings account. Another way to pay for a transaction or withdraw
money from an account is to use a debit card. This card allows access to a
checking account to pay for a purchase. A debit card can also be used to
obtain cash through an automated teller machine (ATM).
As with all money transactions, security and the safety of consumers’
assets are considerations. Banks and other companies are not fl awless.
There are regular reports of security breaches. In these breaches,
individuals’ identities are stolen. These identities may include fi nancial
Common Ways to Save and Invest
Money market
account
A type of savings account requiring a large minimum deposit. This account
earns a higher rate of interest than a regular interest-bearing savings
account. A money market account pays current interest rates. These rates
change from day to day. A money market account is a relatively safe place to
hold money between other investment transactions.
Certifi cate of deposit
(CD)
Similar to a savings account. The financial institution issues a CD to a
person for a minimum dollar amount and fixed time frame, such as $5,000
for one year. In exchange for the commitment, the financial institution will
typically guarantee a higher rate of return than on a savings account.
Stocks, mutual funds,
and bonds
Stocks represent part ownership in companies called public companies.
Mutual funds are groupings of stocks. These groupings are managed by
fund managers. Investments in mutual funds typically follow guidelines and
levels of risk and represent a smaller ownership in many companies.
Bonds are loans to companies or government entities at a fixed rate for a
fixed period of time. When investors purchase bonds, they own a small share
of the loan. Bonds offer a fixed income or interest rate return. There is some
risk, however, in the borrower defaulting on the loan.
Retirement plans A 401(k) is an employer sponsored retirement plan. In a 401(k), the
employee and/or employer make the investment.
Anyone saving for retirement can start and invest in an individual retirement
account (IRA) at a financial institution. There are three different types of
IRAs. These are Traditional, Roth, and Rollover. Each type provides different
tax benefits.
Figure 8.17 Sometimes, money will grow faster if invested. Investing carries some risk, however. What might be a risk
of investing?