Objectives: 1.Explain the purpose of checking and saving accounts. 2.Prepare checks and maintain a checkbook register. Warm Up: Why do people put money in a checking or savings account? *Record expenditures Agenda: 1.Warm Up 2.Ch4 review 3.Ch4 Quiz 4.Banking P.P. 5.Student notes 6.Balancing a check book activity Daily Information Nov.12

Why Open a Checking or Savings Account? Safe place to keep money (Insured by the FDIC) Both are demand deposit accounts –Easy access to money –Many options to withdrawal money Saving accounts are for the accumulation of money May be interest earning

Cash Management The daily routine of handling money to take care of individual or family needs –Effective cash management includes having money available for: Living expenses Emergencies Savings Investing Slide 3

Cash Management Tools ToolInterestSpecial Features Checking Account Demand Deposit 1.5% Checks used in place of cash Easy access Saving Account Demand Deposit 2.3% Temporary holding place Easy access Money Market Account Demand Deposit Type of savings Acc. 2.6% Minimum balance Tiered interest rates Limited withdrawals Certificate of Deposit 4 – 5.4% Penalty for early withdrawal Not easy to access funds Savings Bond 4 – 5.4% Tax advantages Not easy to access funds

Checking Account Features Minimum balance requirements Charge transaction fees Cash back options Limited number of checks written monthly Overdraft Protection (NSF) **Reduces the need to carry large amount of cash

Objectives: 1.Explain the purpose of checking and saving accounts. 2.Prepare checks and maintain a checkbook register. Warm Up: What was the most interesting thing you learned yesterday? *Record expenditures Agenda: 1.Warm Up 2.Banking P.P. 3.Student notes 4.Balancing a check book activity 5.Bank reconciliation activity Daily Information Nov.13

Opening a Checking Account What will I need? –Money! ($50 or $100) –Personal information –Identification –Provide an official signature What will I be given? –Checkbook –Checkbook register

Withdrawals and Deposits A withdrawal (-) involves taking money from your account. o Writing checks o Using debit cards A deposit (+) of money can be made to your account. o Endorsing checks o Direct deposit **Banks will not hold postdated checks and process them at a future date.

Checkbook Register A way to track your account transactions

Writing a Check Sally Smith 500 Great Street Yourtown, NJ Date: 9/6/2006 Pay to the Order Of The Pizza Place $ 9.50 _Nine dollars_ /100 _ Dollars Guardian Angel Banking 423 South 15 th Yourtown, NJ Memo __ Pizza ____ Sally Smith____ : : 503

Monthly Statement Comes from your bank Lists information about each transaction during the period Lists the current balance during the period

Objectives: 1.Explain the purpose of checking and saving accounts. 2.Prepare checks and maintain a checkbook register. Warm Up: *Record expenditures Agenda: 1.Warm Up 2.Banking P.P. 3.Student notes 4.Perform a bank reconciliation. Daily Information Nov.16

Reconcile a Bank Statement B ank R econciliation - the process of adjusting the checkbook register and bank statement so they agree Consider the following: o Deposits in Transit o Ex: Deposits that you make that do not appear on the bank statement. o Outstanding Checks o Ex: Checks you write to other people that have not been processed by the bank yet. o Transposition Errors o Ex: When the numbers you record or incorrect or out of order

Endorsing A Check Signature on the back of the check approving it for deposit. Checks must be endorsed to be deposited Three Types Blank Restrictive Special **Safest way to endorse the check is to wait until going to the bank to deposit

Blank Endorsement Receiver of the check signs his/her name Anyone can cash or deposit the check after it has been signed Endorse Here X Sally Smith_________ DO NOT WRITE, STAMP OR SIGN BELOW THIS LINE. RESERVED FOR FINANCIAL INSTITUTION USE ________________________________

Restrictive Endorsement More secure than blank endorsement Receiver writes “for deposit only” above his/her signature –Allows the check only to be deposited Endorse Here For Deposit Only – Acct X Sally Smith_________ DO NOT WRITE, STAMP OR SIGN BELOW THIS LINE. RESERVED FOR FINANCIAL INSTITUTION USE _______________________________

Special Endorsement Receiver signs and writes “pay to the order of (fill in person’s name) Allows the check to be transferred to another person –Also known as a third-party check Endorse Here Pay to the order of Mike Smith X Sally Smith_________ DO NOT WRITE, STAMP OR SIGN BELOW THIS LINE. RESERVED FOR FINANCIAL INSTITUTION USE _______________________________

Check 21 Check clearing for the 21 st Century Act –Current trend that changes how money is withdrawn and deposited into accounts

How Check 21 Works Prior to Check 21 –Paper checks physically moved from place to place After Check 21 –Paper checks scanned to computer to create a “substitute check” (truncated) –Substitute check is transferred electronically from place to place

Explain/define the following terms in your notes, using the textbook: –Non-sufficient Funds –Bounced Check –Overdraft Vocabulary

What is the importance of performing a bank reconciliation?? Explain in your own words:

Liquidity How quickly and easily an asset can be converted into cash. Liquid assets are important for emergency situations Investors should: –Invest in both liquid and non-liquid tools

Liquidity Checking Account Savings Account Money Market Account Certificate of Deposit Savings Bond Most Liquid Least Liquid

Cash Management Tools ToolInterestSpecial Features Checking Account Demand Deposit 1.5% Checks used in place of cash Easy access Saving Account Demand Deposit 2.3% Temporary holding place Easy access Money Market Account Demand Deposit Type of savings Acc. 2.6% Minimum balance Tiered interest rates Limited withdrawals Certificate of Deposit 4 – 5.4% Penalty for early withdrawal Not easy to access funds Savings Bond 4 – 5.4% Tax advantages Not easy to access funds

Certificate of Deposit (CD) Time Deposit account Pays a fixed rate of interest for a specified length of time Higher interest than a savings account Penalty for withdrawing money prior to the specified length of time **Good option if you do not need immediate access to money

U.S. Savings Bond Discount bond (pay less than face value) –Pay $50 (discount) for a $100 bond (face value) Issued by the federal government –You are loaning money to the government Long-term saving option

Watch Your Money Grow! How can you grow your savings? Through… Principal Simple interest Compound interest

Computing Simple Interest Simple Interest: interest computed on principal once during a certain time period P = amount of money invested R = interest rate T = time period that money will be set aside Simple Interest Interest (I) = Principal (P) × Rate (R) × Time (T) = $1,000 × 6% annual rate × 6 months = $1,000 × 0.06 × 6/12 = $30

Computing Compound Interest Compound Interest: interest earned on both the principal and previously earned interest Quarterly Compounding Annual Interest Rate 6% Beginning Rate Ending YearBalance 6% QuarterBalance $ $1.50$1.52$1.55$1.57$ $ $1.59$1.62$1.64$1.66$ $ $1.69$1.72$1.74$1.77$ Future Value of Money

Rule of 72 How long will it take to double my money? Divide annual interest rate into 72 Example: if you invest $50 at 6% interest, your money will grow to $100 in 12 years ( 72 ÷ 6 = 12 years)

Available Banking Services Safe deposit boxes Overdraft protection ATMs Cashier’s checks Financial advising Loans Internet banking Bank cards

Costs of Banking Monthly account fees Nonsufficient fund fees Special service fees o Examples: stop payment, cashier’s check, money order ATM fees Inactive account fees

What Are Consumer Responsibilities? Maintain your balance o Avoid writing bad checks. Monitor your account o Reconcile your bank account. Know your rights o Be aware of consumer protection laws.