Banking Unit Mrs. Bullock

Financial Sayings: A dollar _____ is worth more than a dollar tomorrow! A penny saved is a penny earned!

Paying Yourself First https://www.youtube.com/watch?v=MA8ae6Scvzk

High Cost of Waiting to Save https://vimeo.com/116004645

How Much Money Should Be Saved? At least ___ months worth of expenses in emergency savings $2,000 monthly expenses 6 months $12,000 Depends on… Income Job security Insurance coverage Dependents

What is the Barter System? Barter system is when money is not used. Goods and services are ________ for other goods and services.

Money used to exchange/buy items Preventing __________ http://www.abcoffice.com/office-equipment- news/tag/counterfeit-money-detectors/

The denominations of coins in the U.S. are: $.01 – the penny $.05 – the nickel $.10 – the dime $.25 – the quarter $.50 – the half dollar $1.00 – the dollar

Why does the U.S. currency have value? Because . . . U.S. money is money NOT backed by _____. The value of money is based on the confidence in and strength of the U.S. government.

Money also known as “Green backs” What is the back-ground color of United States paper currency (bills)? _____

What is the role of the U.S. Department of the Treasury Printing, minting currency through the Bureau of Engraving and the U.S. Mint. Federal taxes collected by or paid to the Internal Revenue Service.

U. S. Federal Mint U.S. Federal Mint operating bureau of the Department of the Treasury makes new _____. U.S. Bureau of Engraving and Printing prints new ______. New coins and currency are sent to the Federal Reserve Banks which distributes as needed. https://www.youtube.com/watch?v=0zCkIifQCak

Federal Reserve - The FED The FED uses _____ policy to regulate the nation’s money supply. Provides banking services to depository institutions. Supervises and regulates most large banks. Formulates and implements money policy. http://www.frbatlanta.org/news/multimedia/130514_fedExplained_regionalbanks.cfm

Depository Institutions Commercial Banks VS. Credit Union

Why use a Financial Institution Money deposited is insured Banks: _____ insured Credit Unions: _____ Savings will earn interest while the depository institution “uses” the money to make loans Most funds are “liquid” – you can convert them to cash quickly and easily. CDs are less liquid than savings and checking.

Types of Depository Institutions Two types of depository institutions are: Commercial Bank Credit Union For-profit Not-for-profit – owned by members Open to anyone who wants to utilize a depository institution Have membership qualifications – members must share a “common bond” Offer numerous financial services Offer many services but usually not as many as a bank Usually the largest depository institutions Are often able to pay higher interest rates and charge lower fees http://www.youtube.com/watch?v=dSSH82DdMH4

Depository institutions keep your money safe Federal Deposit Insurance Corporation (FDIC) National Credit Union Administration (NCUA) Offer a safe and secure place to store your money Security (safes, secure networks, etc.) Insurance Insures banks and other types of institutions other than credit unions Insures credit unions $250,000 per depositor, per insured institution, for each account ownership type http://www.youtube.com/watch?v=CTczppmeSjg http://www.youtube.com/watch?v=WcwdLb_8f-M Same as FDIC

Services offered by depository institutions Transaction and Savings Tools What services does the depository institution identified in your community offer? Loans Credit Safe-Deposit Box Financial Advice

Depositing large amounts of money If a person makes a deposit of _________or more into a bank account, the bank must notify the U.S. Treasury Department.

What is Interest? Interest – the price of money Interest rate – percentage rate used to calculate interest Interest may be earned or paid Depository institutions offer secure accounts to save money When you don’t withdraw interest earned from an account the interest earns additional interest Compounding interest – earning interest on interest

How can you earn interest on your money? Certificates of deposit “CD” – less liquid Earns higher ______ rate than Money Market or Savings accounts. Larger amounts of money deposited for a period of time for a fixed interest rate. Cannot be withdrawn without penalty! 31 days to 8 years Can be rolled over into another CD Must pay taxes on interest earned

Compound Interest and https://vimeo.com/116004385

Rule of 72 Easy way to calculate how fast your savings will ______ in value at given interest rates The formula is 72 divided by the interest rate earned. For example, at 10%, $100 will double in a little over 7 years (72/10 = 7.2 years). How long would it take $100 to double at a rate of 2%? https://www.youtube.com/watch?v=HN2K-dkONb4

Compound Interest A savings account earns the _______ Amount of Money when the Interest on the Account is Compounded Daily!

Compound Interest If you have $100 in the bank at a 05% rate of interest and the interest is compounded yearly, you will have $105 at the end of the year. (*1) http://www.investor.gov/tools/calculators/compound-interest-calculator If the interest is compounded daily, the $100 earns 1/365th of the interest on day one; however, day two the interest is compounded not on the $100 but on $100 plus the interest earned the first day (it may only be slightly more than a penny but it adds up). (*365)

How can you earn interest on your money? Money market account – less ____ Earns higher interest rate than Savings accounts Large amount of money deposited for a fixed period of time for a fixed interest rate. Must pay taxes on interest earned.

How can you earn interest on your money? Savings account – ____ liquid Earns lower interest than Certificates of deposit and Money market with no fixed period of time. Must pay taxes on interest earned.

Services Offered at Financial Institutions Savings accounts – earn interest Certificate of Deposit (CD) Checking accounts – may or may not earn interest Debit Card / ATM Card Bill Payment IRA (Individual Retirement Account) – 401K Credit Cards (discussed later) Loans – Mortgage, Personal, Automobile (discussed later) Other services such as safe deposit boxes, financial advice, etc.

Safe-Deposit Box Safe-Deposit box is a ____ box in a bank’s vault Requires 2 keys 1 required by bank 1 required by customer/owner Only owner can access box Pay a fee to rent Store important papers – Mortgage Loan Papers

What is a Series EE savings bond? Series EE savings bonds are issued by the _____________. They can be purchased for one-half of the face value. Earn interest monthly Buy a $50 Series EE bond for $25 Within 17 years is guaranteed to reach face value of $50.00!

Short-term goals & expenses Why Save? Your present self impacts your future self By saving money today you will have financial security in the future Emergency savings Cash set aside to cover the cost of unexpected events Short-term goals & expenses Pay for items that aren’t part of a typical spending plan Financial security Lower stress Lower negative emotions What are examples of emergency expenses?

Savings Accounts __________ interest: interest earned on interest Rate of Return: the APR (Annual Percentage Rate) received on money saved $1000 earning $20 a year in interest has a 2% rate of return ($20 is 2% of $1000). Most savings accounts pay interest quarterly (4 times a year). Interest is taxable.

Savings Accounts ______________: money received today is worth more today than the same amount of money received sometime in the future To determine the time value of depositing money in a savings account, you need to know the interest rate and rate of inflation. If the inflation rate is higher than the interest rate, the money will be worth less at the end of the year than at the beginning. _____________– Series EE – purchase at ½ the face value and when they mature, they are worth the entire face value. Pay interest for 30 years.

Liquidity Higher interest rates are a trade-off for lower liquidity Money Market Deposit Account Checking Account Checking Accounts Savings Accounts Money Market Deposit Accounts Certificates of Deposit Most Liquid/Lowest Interest Least Liquid/ Highest Interest Savings Account Certificate of Deposit

Certificate of Deposit (CD) CDs are savings instruments that require a deposit for a period of time during which there is a _______ for withdrawals. Issued with an interest rate that is fixed for the term of the deposit. This makes them the most predictable.

Certificate of Deposit (CD) Typically pays the highest rate of interest because it is “__________” for a specified time. If interest rates are predicted to drop in the future, you may want to ____ in a long-term, fixed rate CD. CD terms range from days to months to years.

Cash Cards

Cash cards Consumers purchase cash cards for a specific amount of money. Money is ______ and stored on the card’s memory. Money can be spent. Some merchants allow customers to _________ money on the cash cards.

Cash/Gift Cards Cash cards can be ________ or ______ with money to be used to pay for goods and services. Examples of cash cards are Walmart (reloadable), phone cards (reloadable), Chick- fil-A (disposable), etc. Cash cards are not the same as debit cards since they are not tied to a bank account.

Checking Accounts

Checking Accounts Some accounts __ interest (Money _____ Accounts) but they may require a minimum balance and/or limit the amount of checks written Most banks do not return the checks written to you but they must maintain a copy (this saves them money) When making a deposit, list the checks and cash separately on the deposit slip. Checks are normally “held” (not available as funds) for 3-7 days. Cash is immediately available for use.

Checking Accounts Checks are _____ of payment so make sure you date them! Personal checks will be paid by the bank as long as there is money in the account (if not, you are charged an_____funds fee and the check is not honored) If your balance does not match the bank’s balance, determine that checks already written have cleared. If there is still an error, let the bank know so they can investigate.

Checks Checks are the method in which you make ________ to your checking account _______ endorsements (you sign the back of the check with just your signature) can be cashed by anyone. Certified and Cashier’s checks are bank checks and the funds are __________. Personal checks are not guaranteed (may not have the money in the account).

Checks Money orders are purchased to pay a _______ amount to a specific person. They are sold for a fee. Paychecks are normally direct deposit – money is available sooner than if you had to deposit it in person. Cashing a check somewhere other than your bank may incur fees.

Bouncing a Check Check written for an amount _______ the current balance held in the account ‘Bounces’ due to insufficient funds, or not enough money in the account to cover the check written A fee will be charged to the account holder Harm ______ opportunities for credit

Debit/ATM/Phone Cards and Electronic Transfers Using an electronic device (such as an ATM) to make debits (withdrawals) or credits (deposits) is a form of electronic funds transfer (____). Debit cards expose you to a greater likelihood of _______ theft.

Debit Cards Purchases made with your debit card are deducted __________ from your checking account.

Debit/ATM Cards If you lose your debit or ATM card, notify the bank _______. If reported within 2 business days, you are only liable for up to ____ in unauthorized purchases. After 60 days, you may be liable for the _____ amount!

ATM Cards Using an ATM requires a PIN (personal identification number). Your pin should be a ________ selection of letters and numbers but something you can remember (never write it down and carry it with you). Never give anyone your PIN! Using another bank’s ATM or store ATM will result in fees.

Automated Teller Machine No fees if you use your ____ bank Personal Identification Number “PIN” Keep it ____!

Bill Payment / Funds Transfer Bill Payment or funds transfer is a form of EFT. Setting up _________ bill payment is a good way to pay fixed amount bills such as mortgage payments, car payments, tuition payments, etc. Setting up an _______ transfer from checking to savings each month is a good way to establish a savings plan.

Individual Retirement Account or an IRA You can set up an Individual _______ Account at a _______!

Individual Retirement Accounts You can set up an IRA at a ____ or ________in addition to _________. IRAs are intended to be used at retirement. There is a 10% penalty on any money withdrawn before the age of 59.

Individual Retirement Accounts Roth IRAs have the ____ paid when the money is deposited; Traditional IRAs have the taxes paid when the money is withdrawn (at retirement). Both earn _______ / __________. The amount you contribute to a traditional IRA reduces your taxable income by the amount you contribute.

401K 401K accounts are usually retirement accounts at your job which you can ________ to as either ___-tax or ______-tax income. Sometimes the employer will ______ up to a certain %.

Types of Checking Accounts Designed for people who write a few checks each month and do not keep a minimum amount of money in the account _______-Bearing Account that earns interest on the balance Requires a minimum amount in the account at all times

Tools for Checking Accounts Check / Debit Card Can be used anywhere Visa & MasterCard are accepted Instantly drafts payment from your account Always sign or write “Check ID” on the back! Check Book Official check forms from the bank Check Register Used to record all checking transactions (debits, checks, deposits, transfers,, etc.) Bank Statement Official bank document listing all checking transactions Emailed or mailed every month

Click here to learn about the difference between each type of check. Types of Checks Click here to learn about the difference between each type of check. Personal Travelers Cashier Certified

Certified Check _______ Check is a check for which the bank guarantees payment. It is stamped by the bank Funds to cover are immediately withdrawn from depositor’s account.

Elements of a Check ________: the owner of the account & the person who signs the check ______: the person to whom the check is written _______: the bank or financial institution that pays the check

Cashing Checks _______ a check is signing off that you are the payee listed. Sign the line on the back of the check when you cash or deposit it. You can also sign over a check to another payee. Endorse Check Here X_________________________________________________________________________________________________________________________________________________________ Do not sign / write / stamp below this line -------------------------------------------------------------------

Blank Endorsement Receiver of the check signs his/her name Anyone can cash or deposit the check after has been signed

Restrictive Endorsement More secure than _____ endorsement Receiver writes “for deposit only” and account number above his/her signature Allows the check to only be deposited

Special Endorsement Receiver signs and writes “pay to the order of (fill in person’s name)” Allows the check to be ________ to a second party Also known as a two- party check

Worksheet Answers Blank Restrictive Special Student’s Signature X Endorse Here X For Deposit Only—Acct. # 987654321 Student’s Signature Endorse Here Special Pay to the Order of Jonathon Smith Student’s Signature X Endorse Here

Making a Deposit _________ slip Contains the account holder’s account number and allows money (cash or check) to be deposited into the correct account Located in the back of the checkbook Complete a deposit slip to make a deposit Deposited amount must be recorded in the checking account register to keep the balance current Deposits can be made at an ATM or with a bank teller

Completing a Deposit Slip _____ The date the deposit is being made

Completing a Deposit Slip _____________ Sign this line to receive cash back

Completing a Deposit Slip _______ The total amount of cash being deposited

Completing a Deposit Slip ______ List each check individually Identify each check on the deposit slip by abbreviating the name of the check writer

Completing a Deposit Slip _______ If more checks are being deposited than number of spaces on the front, use the back List each check Add the total, enter it on the front

Completing a Deposit Slip _____________________ The total amount from all checks listed on the back

Completing a Deposit Slip _________ The total amount of cash and checks

Completing a Deposit Slip ____________ The amount of cash back being received This amount is not deposited into account

Completing a Deposit Slip ____________ The amount being deposited into the account To calculate the amount, subtract the cash received from the subtotal

Worksheet Answer

Amount Spelled Out In Words Parts of a Check Today’s Date Name of Payee Amount Amount Spelled Out In Words Name & Address of Bank Purpose Signature

Writing Personal Checks Use checks in order by number Always use the current date Write the payee’s name clearly on the line labeled _____________ Write the amount to be paid in numeric figures after the printed dollar sign $

Writing Personal Checks Spell out in _____ the _____ to be paid clearly on the line below the payees name Indicate the purpose of the check on the line labeled For Sign your check

Tips for Writing Checks Write checks in ___ Only write checks if you have enough $$$ in your account to cover it Use the current date

Tips for Writing Checks Always fill in the _________ _______ checks on which you make an error Record every payment in your check _______, including EFT

Writing a Check To pay for items using a checking account A check is given as a form of payment Must be completed and given to the person or business Pre-printed items on a check Name and address of account holder Name and address of financial institution _________ Identification numbers (account, routing)

Writing a Check _______________ Account holder’s name and address May include a phone number, not required DO NOT list a social security number for safety reasons

Writing a Check _______________ Numbers used to identify checks Printed chronologically

Writing a Check ______ The date the check is written

Writing a Check _______________ The name of the person or business to whom the check is being written

Writing a Check _________________________ The amount of the check written numerically in the box Write the cents smaller and underline Write the numbers directly next the dollar sign to prevent someone else from adding numbers to change the amount

Writing a Check ___________________________ The amount of the check written in words on the second line Start at the far left of the line, write the amount in words, followed by ‘and’, and the amount of cents over 100; draw a line from the end of the words to the word ‘dollars’

Writing a Check ______ Space used to identify the reason for writing a check; optional Good place to write information requested by a company when paying a bill, generally the account number

Writing a Check ____________ The account holder’s signature agreeing to the transaction

Writing a Check _____________________ First - routing numbers to identify the account’s financial institution Second - account number Third - check number

Worksheet Answers

Worksheet Answers

Checking Account _____ Place to record all monetary transactions for a checking account Deposits, checks, ATM use, debit card purchases, additional bank fees Used to keep a running balance of the account Remember Record every transaction!

Check Register _____ The date the check was written or transaction was made

Check Register _________ The number of the written check; if a debit card or ATM was used, write DC or ATM

Check Register _______________ The person/business the check was written to or where the debit card was used Gray line can be used to write the memo

Check Register ____________(-) Amount of the transaction Deducted from the balance

Check Register __________(+) Amount of the transaction Added to the balance

Check Register ___ A box used to track whether the check has cleared on the monthly bank statement when reconciling at the end of each month

Check Register ___ (if any) Any extra fees charged to the account Listed on the bank statement

Check Register ________ The running total of the checking account Calculated by adding or subtracting each transaction Keep this updated

Caution! If you are not careful with your checking account, you might incur ______ _______ from the bank! _________ – using more debits or writing more checks than the money available in your account ___________- an order for a bank not to cash a particular check or set of checks

_________________ Process of comparing your check register to your monthly bank statement Verify that starting and ending balances match

Monthly Bank __________ Lists each monetary transaction and the current account balance for a specified time period Includes: Dates Identification for each transaction (number or type, date, amount) Transaction amounts for withdrawals and/or deposits Interest earned (if applicable) Fees or charges (if applicable)

Monthly Bank Statement Lists each ________ and current account balance Deposits Checks Debit Card transactions ATM transactions Additional fees

Reconciling a Checking Account ___________ Balance the checkbook register each month to the balance shown on the statement Do this every month to ensure the correct balance in the checkbook Knowing the correct balance can help to avoid bouncing checks

Steps for Reconciling View the monthly bank statement and check register

Place a check mark in the √ T column for all transactions that have been cleared and are shown on the bank statement √  

Determine the current account balance from the bank statement

Calculate the Subtotal ____ any outstanding deposits – transactions that have not cleared the bank Calculate the Subtotal

_______ any outstanding withdrawals and calculate Compare the total with the checkbook register. If the totals are different, double check the math and make sure all service fees and bank charges are recorded in the check register.

Checking Account _______ If a checkbook, ATM, and/or debit card becomes lost or stolen __________ report it to the financial institution File a report with the ___________ Reported lost/stolen checkbook: Financial institutions generally do not hold the account holder liable for any fraudulent charges

Safety continued Reported lost/stolen ATM/debit card: Within 2 business days Cardholder is only liable for $50.00 Longer than 2 business days Could be liable for up to $500.00 Varies depending upon the financial institution May not charge the account holder anything if the correct steps were taken to report the lost/stolen card

TheMint.org http://www.themint.org/teens/writing-a-check.html http://www.themint.org/teens/balance-your-checking-account.html TheMint.org Follow the directions to practice writing checks and learn how to track your checking account!

How to complete A deposit Slip Watch the video on how to complete a deposit slip and then practice!