The purpose of this guide is to provide the CAO with descriptions of various types of resources; some more common than others.
Checking accounts
Free checking – No monthly service charges or per-item fees regardless of balance or activity. Fees generally assessed for this type of account would be an “insufficient funds” fee
Basic checking – Basic accounts may require direct deposit or a minimum balance to avoid monthly maintenance fees. Limits on number of checks allowed per month and per-item fees may be charged for each additional check written over the monthly allowance.
Joint checking – An account owned by two or more people, usually sharing a household and expenses.
NOW (Negotiable Order of Withdrawal) accounts – an interest-bearing checking account.
Super NOW accounts – demand deposit account (DDA) that offers a higher interest rate than a NOW account and a lower interest rate than a money market account. To open and maintain an account it requires a minimum balance of $2,500.
Money market accounts (MMAs) are similar to savings accounts and allow easier access to funds by giving the account holder limited check writing ability. MMAs also earn a higher rate of interest.
A certificate of deposit (CD) is a bank deposit that cannot be withdrawn for a certain period of time or can be withdrawn early only with a penalty. Even though an account has a penalty for early withdrawal funds may still be accessible. CDs earn higher rate of interest than a regular savings account.
The U.S. government borrows considerable amounts of money, much of it by issuing securities.
Many federal agencies created by Congress have charters to issue securities. These include the Federal Home Loan Bank Board, Federal Home Loan Mortgage Corporation (FREDDIE MAC), Export-Import Bank, TVA, and Government National Mortgage Association (GINNIE MAE). They have maturity dates from one week to thirty years, and the minimum investment ranges from $1,000 to $25,000.
U.S. savings bonds are registered, nontransferable Treasury securities. They pay market-based rates on a minimum investment of $25 for a $50 bond. They can be purchased at almost any bank or through payroll deduction and can be redeemed after six months at most banks.
Treasury bills (T-bills) are short term government securities and have a minimum purchase value of $100. They are sold at discounted rates. The maturity rate ranges from a few days to 52 weeks.
Treasury notes (T-Notes) are government securities with a minimum purchase of $100. They earn a fixed rate of interest every 6 months until maturity. Treasury notes are issued in terms of 2, 3, 5, 7 and 10 years.
Treasury bonds
Treasury bonds have a minimum purchase value of $100. They pay interest every 6 months and mature in 30 years.
Treasury Inflation-Protected Securities
Treasury Inflation-Protected Securities (TIPS) provide protection against inflation; therefore, the principal of TIPS increases with inflation and decreases with deflation as measured by the Consumer Price Index. TIPS are issued in terms of 5, 10 and 30 years and can be held until maturity or sold before.
Floating Rate Notes
Floating rate notes (FRNs) have a minimum purchase value of $100 and the price can be greater, less or equal to the security’s face value. FRNs have a security of 2 years and when it matures the individual is paid its face value or it can be reinvested.
Tables from government bonds traded Over-The-Counter OTC show the nominal or coupon interest rate; the scheduled month and year of maturity; the highest, lowest, and last prices of the bond; and the net change from a previous period. Some tables will quote a yield figure, which is the rate of return per year on the coupon rate at current purchase price. U.S. bonds and securities are quoted in whole numbers and thirty-seconds. Thus a government bond quoted at 98.24 should be read as 98 24/32 or 98 3/4 which translates to $987.50, as they are listed on a par of 100.
Issue |
Bid |
Asked |
Change |
Yield |
6 1/8, NOV 1986 |
89.11 |
90.11 |
+5 |
10.38 |
The quotation shows a security due in November 1986 with a coupon of 6-1/8 percent, a bid price of 89.11 ($893.43), and an asked price of 90.11 ($903.43).
Prices of government securities are determined before commissions are deducted. If a government security is converted, the amount received may be less than the quoted value, because of commissions. The above quotations do not apply to U.S. savings bonds, as they are nontransferable.
Mutual funds is a term that encompasses a wide range of investments. Basically, it is a pool of assets (stocks, bonds, etc.) that are managed by an investment company. Many investors who cannot afford to purchase a large portfolio can pool their money and buy shares of a large portfolio, which is managed for them by professionals. Each share represents a proportionate interest in many different stocks or bonds, so price is based on the assets of the funds divided by the number of shares sold. Dividends typically are distributed quarterly. Mutual funds are referred to as "load" or "no-load" funds. Load funds charge a sales commission, usually 8½ percent of the investment, while no-load funds have no commission.
Growth funds (long-term funds, aggressive-growth funds, performance funds, or hedge funds) – this is one of the largest categories of mutual funds. They usually invest in common stocks. The objective is long-term growth of investment instead of current income. Dividends are typically low, expecting increase in the value of fund shares.
Income funds – the objective is current income through high dividends and interest, as opposed to capital gains. They may invest in blue chip stocks and bonds or often just bonds.
Balanced funds (growth and income funds) – these funds invest in a mix of stocks and bonds to reduce risk and to provide higher current income along with capital appreciation.
Municipal bond fund (tax-exempt fund) – investments are made in tax-exempt bonds and the interest is passed along to holders on a tax-exempt basis. They are more liquid than unit trusts, because they are managed funds.
Founders Group |
52 Weeks |
Close |
Week's Change |
Income* |
Capital Gains |
|
Growth n. |
8.77 |
6.28 |
6.37 |
-0.08 |
0.157 |
2.505 |
Income n |
15.18 |
13.72 |
13.87 |
+0.01 |
1.273 |
0.232 |
Mutual |
11.56 |
9.74 |
9.98 |
-0.07 |
0.426 |
0.706 |
Special n. |
37.11 |
22.88 |
23.54 |
-0.13 |
1.900 |
1.395 |
n = no-load *Last 12 months |
||||||
The price of a mutual fund share is quoted on the net asset value (NAV), which is the total assets of the fund divided by the number of shares outstanding. The NAV is calculated daily and reported to the National Association of Securities Dealers (NASD). The format of the table above is similar to those quoted in newspapers and financial publications such as Barron's (Financial and Investment News). It shows the names of funds that are managed by the Fund Founders Group. Next, the high and low values for the previous 52-week period are listed, then the most recent closing price or NAV, the change over the previous week, and the fund's income and capital gains totals for the previous 12 months.
Mutual funds are verified in the same manner as stocks. Some mutual funds may charge redemption fees, so the amount received for mutual fund shares may be less than the quoted value. Until they are redeemed, the value of the shares is determined before redemption fees are deducted. This is done because a redemption fee does not reduce the fund owner's equity in the investment even though it may mean a lesser amount of resources after redemption. Contact with a securities dealer may be necessary to establish the value of a mutual fund share if the fund is not listed or is not listed daily.
Money markets make short-term investments in secure conservative markets (Treasury bills, bank certificates, commercial 100s, etc.). The minimum investment is usually $1,000 (some are less) with shares usually priced at $1. Income received on the shares is the return or yield. Income may fluctuate daily based on interest rates. Shares are usually redeemed at the same $1-per-share purchase price. There is often a check-writing feature associated with money markets.
Common stock is usually in the form of a certificate registered in the purchaser’s name. This certificate may indicate a face ("par") value, but this has little relationship to the current value of the stock. Dividends are usually declared and paid quarterly and may vary based on the profits (or lack of profits) the company earns.
There are several types of common stock:
Listed stocks are those listed on the NYSE, the AMEX, or a regional exchange, such as the Boston, Philadelphia, or Chicago exchanges. (These are usually major companies.)
Over-the-counter (OTC) stocks are not listed on major exchanges, because they are usually small companies who do not qualify to be listed.
Penny stocks are OTC stocks. These stocks are usually reported in the National Association of Security Dealers Automated Quotations system.
OTC stocks are quoted on a bid price and an asked price, at which dealers will buy or sell the stock.
Preferred stock receives preference in dividends and distribution of assets in case of bankruptcy. All preferred stock dividends must be paid before common stock dividends can be paid, and while common stock dividends can be skipped, preferred stock dividends are paid at a fixed rate. Convertible preferred stocks can be exchanged for a specific number of shares of common stock at a specified time and price.
Preferred stock is verified in the same manner as common stock. After the name, a "pf" symbol is listed, indicating a preferred stock.
Initial offerings of stocks by a company can often be bought with no commission fee from a broker retained by a company to sell them, but usually stocks are sold in the secondary market by brokers who charge commissions. They may also be sold to brokers, who charge a commission for this service.
Stock tables may vary slightly in format from publication to publication but generally include an abbreviation of the company name; the dividend rate; the number of shares traded; the price/earnings ratio; the high, low, and closing (or "list") prices of the stock, and the change from the last quote. The last or closing prices are the one we are concerned with. Like bonds, stock prices are quoted in whole numbers and eighths. A stock listed at 52-1/4 sells for $52.25.
Name |
Div |
PE |
Sales |
High |
Low |
Last |
Chg |
Phil El |
2.20 |
9 |
4323 |
22 7/8 |
22 5/8 |
22 3/4 |
-1/8 |
Phil El pf |
4.30 |
|
50 |
42 3/4 |
42 3/4 |
42 3/4 |
|
The quote listed above is for Philadelphia Electric Company. The first line is the common stock, which pays a dividend of $2.20 and has a price/earnings ratio of 9, sales of 432,300, a daily high of 22 7/8 ($22.875), a daily low of 22 5/8 ($22.625), and a last price of 22 3/4 ($22.75), which was down 1/8 point from yesterday's closing price. The second line shows a share of preferred stock with a dividend of $4.30, sales of 5,000, a high, a low, and a last price of 42 3/4 ($42.75).
Stock prices are determined before commissions are deducted. Commission charges may mean that the amount received is less than its quoted price.
The values of listed common stocks are printed in many daily newspapers or financial papers, such as the Wall Street Journal. Standard and Poor's Inc. publishes annual stock reports and The Daily Stock Price Record, which lists daily stock prices from 1962. These and other references can often be obtained in libraries and online. Always determine whether the quotation is daily, monthly, or annual.
The value of OTC stocks can usually be verified in the same manner as listed stocks, except you use the "bid" price if the stock is quoted on a bid-and-ask basis. In the case of some small, obscure companies, it may be necessary to contact a stock broker to verify the value of the stock.
Corporate bonds are used by corporations to raise capital. There are two types of bonds:
Debentures, which are backed by the issuer’s full faith and credit
Mortgage-backed bonds, which are backed by a lien on the company’s assets
Bonds usually pay a fixed rate of interest for a fixed period of time, with interest payable annually, semiannually, or quarterly, depending on the issue.
Bonds are issued in two forms:
Bearer or coupon bonds - pay interest to whomever holds the bond when interest is due.
Registered bonds - pay interest to the registered owner of the bond.
Convertible bonds are corporate debentures that can be exchanged for a specified number of shares of a company’s common stock within limits specified by the issuer. High-risk bonds are called "junk bonds."
Municipal bonds make up the largest part of the bond market. They are issued by cities, counties, state governments and authorities. They are exempt from federal tax and often exempt from state and local taxes for residents of that state.
Most municipal bonds are one of two general types:
General obligation bonds, which are issued on the full faith and credit of the issuing municipality and supported by the taxing power
Revenue bonds, which are backed by the project being financed and the revenue or user fees it generates
Other types of municipal bonds are limited-tax bonds, anticipation notes, industrial development bonds and life-care bonds. Municipal bonds have maturity dates up to 30 years, and $1,000 is the usual minimum investment.
A UIT is a package of bonds in a portfolio. One can buy shares of the package for $1 to $1,000 per share with a minimum investment of $750 to $5,000 depending on the trust. The interest rate is usually fixed at purchase and does not change. Units are usually sold or redeemed through the trust sponsor.
Zero coupon bonds are bonds that pay no current interest but return the amount of the original investment plus all accrued interest upon maturity. Zero coupon bonds sell at a big discount and pay face value at maturity. (This is the same principle that U.S. savings bonds use.) These bonds are generally issued by corporations.
IRAs, Keoghs, and 401K accounts are types of retirement funds. They are described in detail in the Internal Revenue Code.
Early withdrawal of IRA, Keogh, or 401K funds will mean significant tax penalty, but that does not mean it is not a resource. Until it is withdrawn, the value of an IRA, Keogh, or 401K account for resource-determination purposes is the value of the investment.
These are funds set aside specifically to pay for expenses of burial. The funds may have been established directly with a financial institution or through a funeral director. A signed agreement or contract normally exists regarding whether a fund is revocable or irrevocable and whether the fund will earn interest, which is or is not available to the client.
This is a written promise to pay or repay a specified sum of money at a stated time or on demand. It may or may not include interest to be paid.
Although most of the questions below are phrased, "Do you...," it is important to get the same information for the members of each budget group as well as any other person whose resources are used to determine eligibility.
Where do you or any other persons who reside with you cash or deposit your assistance, pay, Social Security, or other checks?
Do you have to pay a fee to cash a check?
NOTE: A "no" answer implies the possibility of a bank account.
Do you belong to any banks or credit unions?
Did you ever have a checking or savings account?
Do you own any stocks or bonds?
Do you own any mutual funds?
Do you have a retirement fund, such as an IRA, Keogh, or 401K?
Does your name appear on another person's bank account, certificate, stock account, mutual fund, etc.?
Do you have any money set aside with a bank or funeral home for your funeral or burial?
Have you loaned money to anyone?
Do you expect to receive any money from anyone?
Do you expect to inherit money from anyone?
Do you expect to receive any money from life insurance or trust funds?
Revised August 28, 2020, replacing September 20, 2012.