Money & Banking Subtitle

Money & Banking What is money? Describe the different types of financial institutions Describe what makes up a bank account. Describe the services offered by a bank.

What is MONEY? Commodity Commodity-Backed Commodity money is money that would have value even if it were not being used as money. Commodity-backed money is money that can be exchanged on demand for a specific commodity.

What is MONEY? Fiat money is money that has no intrinsic value but that has value as money because a government decreed that it has value for that purpose. Form used by most countries today.

Properties of Money Durability – has to last Portability – easy to carry/transport Divisibility – can be divided into small increments that can be used Uniformity – established standard for the look of various denominations. Limited supply – money holds its value Acceptability – commonly accepted as a value exchange mechanism

What is a BANK? A financial institution that stores and manages money for individuals and businesses. BANKING is doing financial business with a bank.

Why do people “store” their money in a bank? Two reasons: To keep it safe. To earn interest. (Make money by saving money)

Different Types of Banks Credit Unions Offers banking services; non-profit that are owned by its customers (members). Retail Banks Provide banking services to individuals and businesses. Corporate owned.

Different Types of Banks Online Banks Retail banks that only operate on the Internet. Savings and Loan Associations A bank that makes mortgage loans using deposits from customers to fund home loans. Central banks Manage the monetary system for a government. Investment banks help businesses work in financial markets. If a business wants to go public or sell debt, they’ll use an investment bank.

Banking Services Checking accounts Savings accounts Loans Money orders & transfers ATMs Investments

How are Banks insured? The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States (U.S.) federal government that preserves public confidence in the banking system by insuring deposits. Insures deposits up to $250,000.00 per account holder Was created in the 1933 in response to widespread bank failures and massive losses to bank customers.

How are Credit Unions Insured? The National Credit Union Administration (NCUA), is an independent agency of the United States government that regulates, charters and supervises federal credit unions. Insures shareholder accounts up to $250,000.00

Types of Bank Accounts Checking accounts offer the easiest access to bank customers' money. Customers are able to withdraw money, write checks to private or commercial payees, and withdraw money through ATMs. Checking Account Savings accounts offer a restricted level of access to money for account holders, but they allow customers to earn interest on saved money. Federal regulations require banks to maintain liquid reserves that cause banks to limit the number of withdrawals without penalty from savings accounts Savings Account Offers customers a way to save a certain amount of money over a predetermined period of time. Withdrawals are restricted. Certificates of Deposit (CDs) Most retail customers use checking accounts, savings accounts, and investment accounts. Some of these accounts offer interest on deposits. Some investment accounts, Individual Retirement Accounts (IRAs), allow customers to save for retirement and reduce their income tax liability.

Checking Accounts PRIMARY PURPOSES: safety of your money convenience for paying for goods and services.  Other purposes for checking accounts include: Having a debit card attached to it so you can use your debit card to make purchases Having access to ATM machines to make deposits and withdrawals Checks make a good record of payment Depositing a paycheck by direct deposit can eliminate trips to the bank or ATM Some checking accounts pay interest No check cashing fees when you cash your paycheck with your bank

Types of Savings Accounts A basic savings account usually offers a low rate, but it can keep your money safe and give you quick access to it in case of an emergency. A money market account often requires a higher minimum balance and, in return offers a slightly better rate. The account might also come with a debit card or the ability to write checks, but transactions are still limited per month. A certificate of deposit, or CD, holds money for a fixed term, anywhere from a few months to a few years. This account usually offers the highest annual percentage yield; the longer the term you commit your cash to, the higher the interest rate.