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. Shus new job pays $30,500, of which she keeps $24,000 after taxes. Her monthly expenses total $1,600. Shus 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.

Shus older brother, Wen, has urged Shu to start saving from day one on the job. Wen has lost a job twice in the last 5 years through company downsizing and now keeps $35,000 in a 2 percent money market mutual fund in case it happens again. Wens annual take-home pay is $48,000.

Shu has started shopping around for accounts to hold her liquid assets. Shed like to earn the highest rate possible and avoid paying fees for falling below a specified minimum balance. She plans to open two accounts: one for paying monthly bills and another for short-term savings.

Questions

1. Name at least three ways that Shu could automate her asset management. Suggest at least one option for each of 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 brothers lead, how much emergency savings should she try to set aside?