Question

In: Finance

Case study Twins Laila aru' Lily are excited to be starting collego next year. Laila is...

Case study

Twins Laila aru' Lily are excited to be starting collego next year. Laila is leaving horne
behind and heading to college in Florida while her sigtor Lily in going to live at home and
attend a local university. up until now, they have always use' cash or gift cards received
for holidays or birthdays to pay fcx their expenses. Any savings they had was in their
piggy banks in their rooms. Now that college is almost here. they realize that cash may
be the best option.

1. Why is cash not always a good Option?

2. What should Laila consider when picking a bank? What about Lily? Do they have different needs?

Solutions

Expert Solution

Part (1)

Cash is not always a good option. Reasons being:

  • Can be stolen, lost
  • Lack of transparency as transactions can't be tracked, traced all the time as there is no physical or electronic bank statement
  • Cash in hand forces you to splurge, spend more than what you may have in mind
  • Cash tempts you, deviates the focus of your mind
  • No interest on idle cash in hand
  • Doesn't leave any money trail, hence there is no credit history
  • You don't establish any relationship with bank

Part (2)

They can have slightly different needs because they have different locations.   Laila is leaving horne behind and heading to college in Florida while her sigtor Lily in going to live at home and attend a local university.

Laila will therefore need a bank that is strong nationally, that is not restricted geographically. Lily can do with a local bank that can give her personalized attention. They should consider following before picking a bank:

  • Savings and current account interest rates
  • Minimum balance requirement for earning interest
  • Location and network of ATMs
  • Fees for banking services and penalties
  • Local presence vs geographical spread
  • Convenience, personalized attention, query resolution track record
  • Online and mobile banking platforms

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