How Should the Johnsons Manage Their Cash?

In January, Harry and Belinda Johnson had $10,660 in monetary assets:

• $1,100 in cash on hand;
• $1,200 in a savings account at Windsor Family Credit Union earning 1% interest;
• $4,000 in a TFSA at the TD Bank, earning 1.1% interest;
• $2,260 in a TD Bank Mutual Fund earning a return of 1.3%;
• $2,100 in their regular chequing account at Windsor Family Credit Union earning 1%.

(a) What specific recommendations would you give the Johnsons for selecting checking and savings accounts that will enable them to effectively use the tools of monetary asset management?

(b) Their annual budget, cash-flow calendar, and revolving savings fund indicate that the Johnsons will have additional amounts of about $8500 to deposit in the coming year. What are your recommendations for the Johnsons regarding use of an investment account? Why?

(c) What savings instrument would you recommend for their savings, given their objective of saving enough to purchase a new home? Support your answer.

(d) If the Johnsons could put most of their monetary assets ($10,660) into a savings account earning 1.4%, how much would they have in the account after one year?

(e) Harry and Belinda have had some disagreements regarding their anniversary dinner and holiday gift spending over the past few months, and ended up not having a balanced budget for the year. Provide some advice for the couple about how to resolve or, better, prevent such disagreements in the future.