1. Name at least three ways that Shu could automate her asset management. Suggest at least one option for retirement savings, general savings, and general convenience.
2. What major factors should Shu consider when selecting a checking and/or savings account?
3. Why does Shu need an emergency fund? Assuming she wants to follow her brother's lead, how much emergency savings should she try to set aside? What type of account would you recommend for her emergency fund?
4. Comment on Wen's use of liquid assets. How is his savings philosophy both risky and conservative? What is the real after-tax rate of return, assuming a 3 percent inflation rate and 25 percent marginal tax bracket?
5. Shu has narrowed her "savings" account choices to a standard checking account paying 0.25 percent, a money market deposit account (MMDA) paying 1 percent, and a money market mutual fund (MMMF) earning 1.75 percent. Which liquid asset vehicle would you recommend for paying monthly expenses, and which would you recommend for saving for the car down payment? Explain the advantages and disadvantages associated with each choice.
6. Shu has heard that some local auto dealerships may require a cashier's check for the down payment. Why is a cashier's check preferable to a certified check?
Shu Chang, 22, has just moved to Denver to begin her first professional job. She is concerned about her finances; specifically, she wants to save for "a rainy day" and a new car purchase in 2 years. Shu's new job pays $30,500, of which she keeps $24,000 after taxes. Her monthly expenses total $1,600. Shu's new employer offers a 401 (k) plan and matches employees' contributions up to 6 percent of their salary. The employer also provides a credit union and a U.S. Savings Bond purchase program. Shu also just inherited $5,000.