Banking Unit

TEKS Evaluate the forms of financial exchange including cash, credit, debit, and electronic funds transfer Identify types of currency, including paper money, coins, bank notes, government bonds, and treasury notes List the function of money as a medium of exchange, unit of measure, and store of vlaue

TEKS cont. Simulate opening and maintaining various types of bank accounts Reconcile bank statements Compare the advantages and disadvantages of different types of banking services Examine investment growth by developing a personal investment plan

A Bank is a business People who want to start a bank must apply for a charter from the state If the charter is from the federal government , the bank will operate as a national bank Banks are heavily regulated. Many people’s money is at stake!

Types of Banks Commercial—full-service banks that offer checking, savings, loans, and other services Credit unions-user-owned, not-for-profit cooperative financial institutions. Formed by people in the same company, union, etc. They offer checking, savings, debit & credit cards, loans, electronic banking services, etc There is the teacher’s federal credit union, police officer’s credit union, etc.

Most common bank services Accept deposits Transfer funds Lend money Store valuables Provide financial advice Manage trusts Distribute debit and credit cards

What are debit cards & why are they so popular? Debit cards are used most frequently instead of paying with a check. The money automatically comes out of your checking account and is transferred to the store’s checking account in one single transaction. The debit transaction will appear on your online bank statement within 24 hours Restrictions—some banks will not let you go over $400 on your debit card in any one transaction.

What is a credit card? A credit card allows you to charge for items and pay off the cost of the item over a period of time. In return for the bank allowing you to charge the item, you will make payments back to the financial institution that also include a monthly finance charge. The charge is based on how much you owe. The more you owe, the higher the finance charge. You should avoid purchasing things you know you cannot afford.

Advantages of a checking account Convenience – you can write checks to pay your bills Safety- money is in the bank—do not have to worry about fire, theft, or carelessness. Can send a check through the mail. Money is protected (insured) by FDIC Cancelled check is proof of payment Bank statement is a record of financial deposits and payments.

Opening a Checking Account Must fill out a signature card Make the first deposit (fill out a deposit slip) Decide what type of account you want: Regular checking (service charge) Interest bearing earn interest if specific balance is maintained at all times (example: $3,000 +) Money market (few withdrawals, must maintain a high balance, interest bearing) Student account (parents must maintain a specific balance in their accounts)

Endorsing Checks 3 ways: Blank—Just sign your name on the back Restrictive—For deposit only and your name (safest) Special or Full—Pay to the order of another person and sign your name (only the other person can cash the check)

Maintaining a checkbook You should record all deposits and all checks in your check register or on a check stub. You should at all times keep records of your account and reconcile your balance every month when you get your statement. People make mistakes!

Parts of a check Be able to identify: Payee Drawer Drawee Date ABA number Federal reserve # Amount in figures Legal Amount Bank Routing number Checking Account number Check number

Tips for Writing Good Checks Always use ink Write clearly Write No/100---- for even amounts Raise cents 58/xx and 58/100---- Void checks when you make an error Only write checks if you have the money in your account Record all checks written

Other Types of Checks Certified- Personal check for which a bank has given payment. Cashier’s –A check where you give the teller cash plus a service charge and she prints a check which guarantees the money has been paid (much like a money order) Traveler’s Check-Checks that you carry that you have paid cash for. Must sign at the bank and then at purchase (very safe). Keeps you from carrying cash with you on vacation. Money Order -You purchase these with cash and these can be put in the mail, etc. Payment is guaranteed.

More sources of money Wiring money –can be sent quickly in an emergency Electronic funds transfer—money can be transferred from one account to another as at an ATM machine Direct Deposit—you can have your paycheck automatically deposited in your account.

Processing checks Checks may be cleared within one bank, through a clearinghouse, or through the Federal Reserve System. See page 384 for the cycle a check may follow…

Your Bank Statement Contains all service charges Contains a list of cancelled checks (checks that have cleared the bank) Contains a list of cancelled deposits (deposits that have cleared the bank)

Your Checkbook Contains a list of checks that you wrote Contains a list of deposits that you made You must reconcile or bring your checkbook in balance with the bank statement: Subtract service fees from your checkbook side Add outstanding deposits & checks to the bank’s side

Money Guaranteed The FDIC (Federal Deposit Insurance Corporation) guarantees your money in the bank up to $250,000 per account. This was passed in July 2010 from $100,000 to $250,000

Other places to invest your money Life Insurance Companies – pay an amount per month every month--cash is received as a death benefit to your family if something happens to you, can earn dividends/cash value if whole life insurance Investment Companies- set aside a specific amount each month—money is invested based on percentage of risks in stocks, bonds, treasury bills (mutual funds, 401Ks, 403B’s are what these are called at work) Finance Companies—loans for emergencies; usually quite costly

Currency 100’s– Benjamin Franklin 50’s –Ulysses S. Grant 20’s –Andrew Jackson 10’s –Alexander Hamilton 5’s --Abraham Lincoln 1’s –George Washington The federal reserve has taken precautionary measures to see that bills are not counterfeited. How do you know a bill is counterfeit?

Coins One dollar—Sacagawea 50 cent piece- John F. Kennedy Quarter-George Washington Dime-Franklin Roosevelt Nickel – Thomas Jefferson Penny- Abraham Lincoln

Selecting where to put your money Look at Services offered Safety Convenience Growth in funds Fees & Charges Restrictions

How to Become a Millionaire Make a personal plan Put aside at least $200 a month starting at age 25 Consistently invest this money each month in growth options Never stop the plan and increase it to $300 in your 3o’s and $400+ in your 40’s You will have over a million dollars before you are 65 years old.