FINANCIAL AWARENESS Checking & Savings Accounts Lesson 3: Managing a Checking Account – Part 2 Instructor PowerPoint Copyright © 2009, Thinking Media, a division of SAI Interactive, Inc. All rights reserved. The Career Ready 101 logo is a registered trademark and Career Ready 101 is a trademark of SAI Interactive, Inc.

2 Distribute Handout #1: Sample Checking Account Statement Sample Checking Account Statement

3 Checking Account Statement Each month, you should receive a Checking Account Statement or Bank Statement from your bank detailing all of the transactions for the specified time period. It is extremely important to review your bank statement upon receipt to check for discrepancies and errors.

4 Checking Account Statement At most banks, if you do not report an error or discrepancy within 60 days of receipt of your statement you will be held responsible for those transactions. You should compare your Transaction Register to the monthly Checking Account Statement and balance your account.

5 Reading a Bank Statement Most monthly statements include the same information. Bank and Customer Information At the top of the statement you will see the bank name and branch location and your personal information to include name, address and account number. You will also see the type of account (i.e., checking, savings, money market, etc.) and the period of time for the transactions.

6 Reading a Bank Statement Summary Section The summary section of the statement will show the total amount for the specified time period for the following: Beginning Balance (this should match the Ending Balance on your previous statement)

7 Reading a Bank Statement Summary Section Cont. Deposits & Credits (+) (includes all direct and manual deposits and if applicable, reversed charges) Net Interest Earned (+) (if checking account earns interest) Automatic Transfers (+) (if you have funds automatically transferred to your checking account from another account)

8 Reading a Bank Statement Summary Section Cont. Withdrawals (-) (includes all ATM and Debit Card transactions and automatic payments) Fees (-) (if applicable, bank service charges)

9 Reading a Bank Statement Summary Section Cont. Checks Converted (-) (These are checks that were electronically converted by the merchant. This process is similar to a debit card in that the money is immediately deducted from your account.) Checks (-) (checks that were written and cleared during the specified time period)

10 Reading a Bank Statement Summary Section Cont. Ending Balance (this is the balance in your account as of the end of the specified time period. Note: This Ending Balance does not usually match the Balance in your Transaction Register. You have to reconcile your account to ensure it is balanced.

11 Reading a Bank Statement Summary Section Cont. Minimum Balance (this is the lowest balance in your account during the specified time period) Average Balance (this the average balance on your account during the specified time period) Annual Percentage Yield Earned (if you have an interest bearing checking account, this is the annual percentage amount you earn on the account.)

12 Reading a Bank Statement Summary Section Cont. Interest This Period (if applicable, the amount of interest earned during the specified time period.) YTD Interest (if applicable, the amount of interest earned Year to Date (YTD) on the account. YTD is a calendar year Jan. to Dec. and is used for tax purposes.)

13 Distribute Exercise #2: Managing a Checking Account. You will use this handout throughout Managing a Checking Account – Part 2 to mark your responses to questions. Exercise #2: Managing a Checking Account

14 Directions: Circle the best answer to the question. Question 1 Where on a Checking Account Statement would you find the total amount of deposits? Exercise #2: Managing a Checking Account Question 1 A.Interest This Period section B.Deposits & Credits section C.Withdrawals section D.Ending Balance section

15 Reading a Bank Statement Deposits & Credits Section This section of the statement will show a detailed listing of all the deposit and credit transactions during the specified time period. It will include the transaction date, a description of the transaction and the amount of the transaction with the total deposits and credits.

16 Reading a Bank Statement Interest Section If applicable, this section will show a detailed listing of the interest earned on the account for the specified time period. It will include the date the interest was posted to the account and the amount.

17 Reading a Bank Statement Automatic Transfers Section If applicable, this section will show a detailed listing of the automatic transfers to include the date the transfer was posted to the account, a description of the transfer and the amount.

18 Reading a Bank Statement Withdrawals Section This section will show a detailed listing of all the ATM, debit card and automatic payment transactions during the specified time period. It will include the transaction date, a description of the transaction and/or business name and the amount of the transaction with the total withdrawals.

19 Reading a Bank Statement Fees Section If applicable, this section will detail all fees deducted from the account. It will include the date the fee was deducted, a description of the fee and the amount of the fee with the total fees deducted from the account during the specified time period.

20 Reading a Bank Statement Checks Converted Section This section will show a detailed list of the checks that were converted by the merchant to an electronic withdrawal. It will include the date the check was converted, the check number, a description of the transaction and/or business name and the amount of the transaction with a total of checks converted.

21 Reading a Bank Statement Checks Converted Section Cont. Note: Checks that are converted by a merchant to an electronic withdrawal are not normally returned to the bank. Therefore, if you receive check enclosures or check images with your monthly statement, these checks will not be included.

22 Reading a Bank Statement Checks Section This section will show a detailed list of all the checks that were posted to your account during the specified time period. It will include the date, the check number and amount. The checks are listed in number order.

23 Reading a Bank Statement Checks Section Cont. If you see a (*) next to a check number, it means there is a break in the check number sequence. Missing check numbers may appear in the Checks Converted section of the statement or they have not cleared your account yet. Note: The totals shown at the bottom of each section should match the totals shown in the Summary Section of the statement.

24 Reading a Bank Statement Daily Balance Summary Section This section will show your daily account balance for every business day during the specified time period. You can look for trends in highs and lows and try to adjust your budget to better manage your money. Check Enclosures or Check Images If applicable, your processed checks or check images will be included with the statement. You can use this information to balance your account or keep them as proof of payment.

25 Reading a Bank Statement Account Balance Worksheet Most bank statements include an Account Balance Worksheet that you can use to reconcile your account to make sure you balance.

26 Question 2 What is an automatic transfer? Exercise #2: Managing a Checking Account Question 2 A.When a payment is automatically withdrawn from your account B.When funds are automatically transferred to your account from another account C.When a payment is electronically withdrawn from your account D.When a written check is converted to an electronic withdrawal

27 Directions: Study the attached Bank Statement, then answer the question. Question 3 What is the Ending Balance on this bank statement? Exercise #2: Managing a Checking Account Question 3 A.$1, B.$ C.$1, D.$542.32

28 Distribute Handout #2: Sample Account Balance Worksheet Sample Account Balance Worksheet

29 Balancing a Bank Statement Upon receipt, take the time to balance your Transaction Register to your monthly Checking Account Statement. Remember the quicker you respond to an error or discrepancy, the more likely you will be able to resolve the issue.

30 Balancing a Bank Statement First, compare and check-off all of the transactions that are on the Checking Account Statement in your Transaction Register. Remember there is a Checkmark column in your Transaction Register for this purpose.

31 Balancing a Bank Statement If there is an item on your statement that is not listed in your Transaction Register, determine if it is correct. If the item is correct, write it in your Transaction Register and subtract it from your balance. If the item is incorrect, call your bank immediately to have it investigated.

32 Balancing a Bank Statement Remember to also write and deduct any service charges and fees in your Transaction Register. If your checking account earns interest, list the interest in the Deposit or Credit (+) section and add it to your account balance.

33 Balancing a Bank Statement The following are the steps to follow to balance your Checking Account Statement: Step 1 Using the Account Balance Worksheet included on your Checking Account Statement, write the amount shown on your statement for the Ending Balance where indicated.

34 Balancing a Bank Statement Step 2 Add up all deposits which are not included on the statement and write this amount where indicated on the Account Balance Worksheet. Step 3 Add up the Ending Balance and additional deposits. Write this amount where indicated on the worksheet.

35 Balancing a Bank Statement Step 4 Using your Transaction Register, list all of the checks, ATM and debit card withdrawals that are not included on the statement where indicated on the Account Balance Worksheet. Add these outstanding transactions together and write the total where indicated on the worksheet.

36 Balancing a Bank Statement Step 5 Subtract the total outstanding transactions from the Ending Balance and additional deposits total. This amount should equal your Transaction Register balance.

37 Troubleshooting Account Balance If your account does not balance, compare each transaction on the statement to your register again checking closely for the following: Look for a transaction in your register that matches or is close to the amount you are off. Look for transposed numbers (i.e., wrote $12 instead of $21). If the receipt was difficult to read, you could be off by a couple of dollars or cents.

38 Troubleshooting Account Balance After double checking your account and addition, if you still cannot locate the discrepancy contact your local bank branch for their assistance. Did you lose a receipt and guess at the amount? Did you write down the amount before taxes?

39 Distribute Exercise #3: Balancing a Checking Account Directions: Look at the Checking Account Statement, Account Balance Worksheet and Transaction Register, then answer this question. Question Why doesn’t the Account Balance Worksheet and Transaction Register balance? Exercise #3: Balancing a Checking Account

40 Troubleshooting Error in Account When your Transaction Register balance does not match the balance on the Account Balance Worksheet, you need to subtract to determine how much you are off. First look for a transaction in your register that matches or is close to the amount you are off. Exercise #3: Balancing a Checking Account – Instructor Guide

41 Troubleshooting Error in Account Cont. If you still cannot locate the error, next compare each transaction on the statement to your register again checking closely for transposed numbers or incorrect amounts. In the example, the Debit Card purchase on 10/9 at Dale’s Bowling Alley was written as $50.30 instead of $55.30, thus making the account off by $5.

42 Troubleshooting Error in Account Cont. You can see how easy it is to make a simple mistake. You need to update your Transaction Register regularly and double-check that your entries and math are correct.

Lesson 3: Managing a Checking Account – Part 2 END OF LESSON NEXT SECTION LESSON 3: MANAGING A CHECKING ACCOUNT– PART 3