Chapter 14

Banking  Do Now  What do you think banks will be like in 15 years?

How to Manage Your Cash

Banking: Types of Financial Services

…Financial Services  Savings  Storage of funds  Time deposit  Choosing the right Savings Plan  Interest rates  Liquidity  Safety  convenience

…Financial Services  Payment Services  Checking Accounts  Demand deposit  $$$ you put into a checking account  Borrowing  Credit cards  Personal loans  Other Services  Insurance protection, stock, bond, etc…

Electronic Banking Services  Automatic Payments  Funds automatically drawn from account  Check bank statements  Ensure you have enough $$ in accounts  Direct Deposit  Automatic deposit of net pay from employer  ATM’S (AUTOMATED TELLER MACHINES)  Withdraw $$  Deposit $$  Transfer $$  Debit Card- cash card  Fees- avoid fees when possible  E-Payments/Online Payments

Evaluating Financial Services  What are some of the opportunity costs to consider when selecting financial services?

Types of Financial Services  Depository Institutions  Commercial Banks  For profit  Checking, savings, and lending  Savings and Loan Associations  Specialize in savings, mortgages  Non-Depository  Finance Companies  Help those with low credit score  Investment Companies  Life Insurance Companies

Problematic Financial Businesses  Pawnshops  Quick cash loans  High fees  Check Cashing Outlets  Fee: 1-20% of face value of checks

Choosing a Financial Institution

Do Now  What is the difference between a time deposit and a demand deposit?  Jamie applied for direct deposit of her paycheck. What will she receive on payday?

Types of Savings Plans  Regular Savings Account  Passbook Accounts  Benefit- low minimum balance, insured, easy withdrawal  Drawback- low rate of return

…types of savings plans  Certificate of Deposits Certificate  timed deposits  Time- “Term”  Date $$ is available- “Maturity Date”  Benefits-  low risk  insured  Drawback-  penalty for early withdrawal  minimum deposit

…Types of Savings Plans  Money Market Accounts Money Market Accounts  Interest varies month to month  Benefit-  Better rate than traditional savings  Insured  Drawback  Minimum balance ($1,000.00)  Penalty if below minimum balance

…Types of Savings Plans  U.S. Savings Bonds  Benefit  Low minimum deposit  Guaranteed by govt.  No state and local taxes  Drawbacks  Lower rate of return when cashed before maturity date  Long time to mature

Do Now  Read pages  Explain the 5 factors to consider when evaluating a savings plan

Evaluating Savings Plan  Rate of Return  % of increase in the value of your savings from earned interest  Calculation- divide interest earned by principal  Compounding  Inflation  Rate of interest vs. rate of inflation  Taxes  Liquidity  Safety  Restrictions & Fees

Types of Checking Accounts

Using a Checking Account  Writing Checks  Check Register  Record of your activity in your CHECKING ACCOUNT  Checks, deposits, ATM withdrawals, debit card charges, fees, etc…  Checks- Date, check #, exact amount, and name of party who receives check  Maintain current balance

…Writing Checks

Making Deposits  Complete deposit slip

Keeping Track of a Checking Account  Monthly bank statement  Deposits  Checks you wrote  ATM withdrawls  Debit card charges  Interest earned and fees  Reconciliation (p. 443)  Report  Differences between bank statement and checkbook  “Balancing checkbook”