professional career. Marcia is a trainee for a management position at a large department store, and Phil is an engineer at an electronics firm. Their careers have promising futures, but neither has exceptionally good income protection in the event of a layoff. The Helms have saved around $9500, and $6500 of it is in a 2.5% savings account at the credit union where Phil works. They have about $600 in a regular checking account (with Mid-City Bank) that doesn't pay any interest. The Helms' combined take home pay is about $5000/month, and Phil thinks they should take the $7400 out of their savings and invest in the stock market to earn a better return. He points out that, excluding their life insurance policies, they have no other investments. Given the current economic conditions, Marcia thinks this plan might be too risky, but she does agree that the 2.5% yield is not very good.

Recently, at a party, a friend suggested they take out certificates of deposit (CDs) with long maturities because the CDs were paying around 4.5% in interest. The Helms liked her advice and stopped at Phil's credit union to get more information on the CDs. After talking with the office manager for a while, though, they became more confused. He didn't favor CDs; although, the union had them available. He pointed out that interest rates on the new money market accounts were around 4% and didn't require "freezing" your money for a year or more. He also indicated that the union could offer a super NOW account that would allow the Helms to close their current unproductive checking account with Mid-City. This account would give them unlimited check writing privileges with no service charges and would pay 3% interest; however, it would require a minimum balance of $2500. If their balance went below the minimum in a month, interest would be only 2%.

The Helms left the credit union without taking any action. They have asked you for advice on managing their liquid deposits.

In 3-4 paragraphs, answer the following questions.
Do you feel the Helms' $9500 liquid balance is adequate? Explain.
Explain the relative risks and potential advantages of CDs. Explain under what condition(s) you would recommend them for the Helms.
Do you agree with Phil that some of their funds should be invested in the stock market? Explain.
What are your recommendations for a cash management plan for the Helms?

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Based on the information provided, the Helms' $9500 liquid balance may not be considered adequate. While having some savings is certainly a good start, it would be wise to have a larger emergency fund to provide a stronger safety net in case of a layoff or other unexpected expenses. As a general rule of thumb, financial experts recommend having at least three to six months' worth of living expenses saved up in an emergency fund. Given that the Helms' combined take-home pay is around $5000/month, their liquid balance would cover only a little less than two months' worth of expenses.

Certificates of deposit (CDs) can be a viable option for the Helms, depending on their risk tolerance and financial goals. CDs are typically considered lower-risk investments as they offer a fixed interest rate for a specified period of time. The potential advantage of CDs is that they provide a guaranteed return on investment and can offer higher interest rates than regular savings accounts or money market accounts. However, one downside to CDs is that the funds are usually locked in for a specific maturity period, which means the money is not easily accessible during that time. If the Helms have a financial goal that aligns with the maturity period of certain CDs available to them, or if they are comfortable with having some of their money inaccessible for a specified period, then CDs could be a suitable option for them.

Regarding investing in the stock market, it is important to consider the Helms' risk tolerance and investment objectives. While investing in the stock market has the potential for better returns, it also carries higher risks. The stock market can be volatile, and there are no guarantees of positive returns. If the Helms have a long-term investment horizon and are willing to take on the risks associated with the stock market, then allocating some of their funds towards stocks or other investment vehicles may be reasonable. However, it is essential to have a well-diversified portfolio and to consider consulting with a financial advisor to determine an appropriate asset allocation based on their specific circumstances, risk appetite, and financial goals.

For a cash management plan, the Helms may want to consider diversifying their funds across different types of accounts to maximize potential returns while maintaining liquidity. They could allocate a portion of their savings to a high-yield savings account or a money market account with competitive interest rates, given that the current market offers around 4% interest. This would allow them to maintain access to their funds while earning a better return than their current 2.5% savings account. If the Helms decide to open a super NOW account with their credit union, they could use it as their primary checking account, taking advantage of the 3% interest and unlimited check writing privileges. Additionally, they may want to consider setting aside a portion of their funds in a high-yield savings account specifically designated as their emergency fund, with the goal of building it to cover at least three to six months' worth of living expenses. As for their investment options, they could explore allocating a portion to a well-diversified investment portfolio, including stocks, bonds, and other assets, based on their risk tolerance and long-term objectives.