1. Budgeting

2. Essential Questions Why is it important to balance a checking account?
What are the consequences of having (or not having) a budget?
What is the right way to budget?

3. Financial Institutions

4. Purposes

5. Types of Financial Institutions
Commercial Banks (ex. Wells Fargo)
Savings and Loan Associations
Credit Unions (ex. America First Credit Union)
Internet Banks (ex. Ally Bank)
Mutual Fund Companies
Brokerage Firms

6. Why we have them To not carry as much cash Security Credit/Loans
FDIC: Federal Deposit Insurance Corporation
NCUA: National Credit Union Administration
Credit/Loans
Investment returns
Convenience
Spending Plan Tool- helps track where the money goes

7. Services Offered Money Transfers Credit Cards Debit Cards Loans ATMs
Stored Value Cards
Online Banking
Direct Deposit

8. Basics of a Checking Account

9. Comparison Shopping Not all checking accounts are created equal.
Things to consider:
Services
Location of ATMs
Banking hours
Minimum balance required
Minimum transactions or limits
Interest-bearing accounts?
Costs
Non-primary bank ATM transactions
Per-check fees
In-branch transaction fees
Overdraft protection
Printing of checks

10. Opening an Account
Need proof of who you are
Minimum balance

11. OPENING A CHECKING ACCOUNT
Consider providing copies of this application handout, which can be found in the Citigroup Financial Education Curriculum: “Basic Banking Services”, p. 44.
Use “Slide 1: Opening a Checking Account and “Slide 2: Commonly Accepted Forms of ID” to review with the participants the type of application they will probably see when opening a checking account.
• Move through the application, describing the various areas on the form.
• In reviewing the application, stress the need for accuracy and clarity in all information.
• Emphasize that applicants must provide a physical address when their mailing address is a post office box or similar postal receipt area.
The same information is asked of a joint applicant. 11
Slide 1 – Opening a Checking Account Lesson Reference: Basic Banking Services, Activity 4 – Handout 1

12. COMMONLY ACCEPTED FORMS OF ID
Primary ID*
Photo Driver’s License issued within the U.S. or Canada
State Non-Driver Photo ID
Photo Learner’s Permit
Government Photo ID
U.S. Passport
Non-U.S. Passport
Resident Registration Card
Mexican Consular ID (Matricula Consular)
Naturalization Certificate
Employee Photo ID (from a recognizable employer)
Photo Trade License (barber, plumber, electrician, etc.)
Student Photo ID (college/trade school)
Medicare Card (must be 65 or older)
A major topic to emphasize is proper identification. Although acceptable identification may vary among financial institutions, it always includes as least two types of current government-issued identification.
• Such regular identification might include a driver’s license, military ID, passport, green card, etc. In some states, a Mexican consulate card is an acceptable form of identification to open a bank account.
Review this slide and emphasize that this is a list of commonly accepted forms of primary ID, and that secondary ID is required (reviewed on next slide).
* Financial institutions' ID requirements may differ; check with the institution first before applying for an account. 12
Slide 2 - Commonly Accepted Forms of ID Lesson Reference: Basic Banking Services, Activity 4 – Handout 2

13. COMMONLY ACCEPTED FORMS OF ID
Secondary ID*
Foreign Driver’s License
State/Local Gun Permit
Utility Bill (Name and address of individual account should be listed)
Current Bank Statement
National Credit Card
Bank-issued Debit or Check Card
Pay Stub
Car Registration
Mortgage Statement
Letter of Introduction from Bank, Embassy, or well-known Employer
Welfare Card
Supplemental Health Insurance Card
• Review this list of commonly accepted forms of secondary ID.
Taxpayer Identification Numbers (TIN): Social Security Numbers can be used to open basic bank and credit accounts, while Individual Taxpayer Identification Numbers (ITIN) may be used to open noncredit
accounts. Talk with your local bank or credit union about these requirements.
• Be prepared. Call ahead to find out exactly what you will need to open an account and what hours the bank is open.
* Financial institutions' ID requirements may differ; check with the institution first before applying for an account. 13
Slide 3 - Commonly Accepted Forms of ID Lesson Reference: Basic Banking Services, Activity 4 – Handout 2

14. THE PATRIOT ACT
Congress passed the PATRIOT Act in response to the terrorist attacks of September 11, Financial institutions are now required to collect certain information when a new account is opened.
1. The customer must provide identification that includes name, date of birth, address, and identification number.
2. The institution must maintain a copy of the information used to verify the person’s identity.
3. The institution must determine whether the applicant appears on the lists of known or suspected terrorists or terrorist organizations.
Display “Slide 4: The PATRIOT Act.” Explain what the PATRIOT Act is and why it was created. Walk through the points on the slide, explaining what types of information financial institutions are now required to collect when a customer opens an account.
There are often misconceptions about the PATRIOT Act.
• Some believe that the PATRIOT Act prohibits banks from opening accounts for people without a Social Security number. Explain to participants that many institutions accept a range of documents as outlined in slide 2; it may not be necessary to have a Social Security number to open an account.
• Another common myth is that undocumented immigrants can’t obtain legitimate credit or build a credit history. This is untrue. A growing number of financial institutions accept alternatives to the Social Security number to issue credit cards or loans. Additionally, lenders may report the borrower’s repayment information to the major credit reporting agencies using the Individual Taxpayer Identification Number (ITIN).
This law was enacted to fight terrorism; it will not impact the safety of your money. Be assured that the money you deposit in a bank is safe; it is insured up to $100,000 per depositor by the Federal Deposit Insurance Corporation. 14
Slide 4 – The PATRIOT Act Lesson Reference: Basic Banking Services, Activity 4 – Overhead 1

15. SIGNATURE AUTHORIZATION CARD
Use “Slide 5: Signature Authorization Card” to review and describe the areas on the card. Explain the purpose of the signature authorization card and how the bank uses it to help safeguard customers’ money.
Ask those who have a checking account how they make their deposits. Responses may vary, but should include depositing the funds at the bank, through the mail, at an ATM, and direct deposit.
Encourage participants to consider the option of direct deposit.
• Ask if anyone uses the option. If so, have them explain.
• Suggest that they contact their local banker to learn more about setting up direct deposits.
Ask what might be the advantages of using direct deposit. Responses may vary but should include safety and convenience. 15
Slide 5 – Signature Authorization Card Lesson Reference: Basic Banking Services, Activity 4 – Handout 3

16. Terms to Know Bank statement Cancelled Check Endorsement Fee Interest
Minimum Balance
Overdraft Protection
Transaction Limits

17. Terms to Know Bank statement- monthly record of all account activity
Cancelled Check- a check that has been stamped to show it has been deposited (or cashed) and taken out of another’s account
Endorsement- signing a check for deposit
Fee- charges for certain bank services
Interest- money paid to savers
Minimum Balance- requirement to keep a certain amount in an account
Overdraft Protection- an agreement to transfer funds from another account to a checking account to cover insufficient funds
Transaction Limits- maximum number of transactions allowed before incurring a fee

18. How it Works You must put a minimum balance in to open an account
Services offered depend on the financial institution
Allows you to access your money at any time using checks, debit card, or ATM

19. Debit Card Plastic card that looks like a credit card
Electronically connected to a bank account
Money is automatically taken from the bank account when purchases are made
Requires a PIN (personal identification number)
Confirms the user is authorized to access the account

21. Debit Card
 Account Number—Links all purchases made with the card to a designated bank account
Expiration Date— The debit card is valid and may be used until this date
Cardholder’s Name— The cardholder’s full name is written out and displayed.
Magnetic Strip— When the debit card is swiped, the magnetic strip automatically withdraws funds from the cardholder’s account.

22. Debit Card
Authorized Signature— Sign in the signature box on the back of the debit card to authorize payments
Should also write, “See ID” in the signature box
Ensures the person using the card is authorized to do so
Verification Number—This three digit code is located on the back of the card in the signature area
Help ensure the card is in the cardholder’s possession when making purchases
Prevents unauthorized use

23. To Use A Debit Card
Swipe it through the store machine or put into an ATM
Enter the PIN
Complete transaction

24. Pros and Cons - Debit Cards
Pros Cons
Convenient
Small
Can be used like a credit card
Allows a person to carry less cash
Does not allow overspending
Can lose track of balance if transactions are not written down
Opens checking account up to credit fraud
Others can gain access to the account if the card is lost and PIN is known

25. Writing Checks

26. Parts of a Check Personal Information Check Number Date Bank Name
Endorsement Line
Routing Number
Account Number
Check Number

27. Writing a Check John Smith Halloween Costume Your Name
10/28/13
John Smith
$100.00
One Hundred and 00/100
Halloween Costume
Your Name

28. Bouncing a Check
Check written for an amount over 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 future opportunities for credit

29. Check 21 Check Clearing for the 21st Century Act (Check 21)
When a check is written, the money is automatically withdrawn from a bank account
Makes “bouncing checks” difficult

30. Savings Accounts

31. Basically….
Kind of like a checking account, but with higher interest rates.
Money cannot be taken out with a check or a debit card, but can be transferred into your checking account.
Really good to have!

32. Depositing money

33. Deposit Money Take it (money or checks) to the bank
Fill out a deposit slip
Get receipt

34. Types of Endorsements

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

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

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

38. Deposit Slips

39. Check Registers/Reconciliation

40. Checking Account Register
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!

41. Bank Statement

42. Reconciliation

43. Importance of Budgeting

44. What is a spending plan?
A tool used to record and track projected and actual income and expenses over a period of time.
Also called a budget.

45. Spending Plans
Are simply road maps the help people reach financial goals
Need to be flexible to change with various life stages
Are not difficult to establish but do take time and commitment.
**Recommended to track spending prior to creating a budget.
NOTE: There should not be any money left over in a budget. If there is, it should be put into the savings or charitable giving column.

46. Benefits of Spending Plans
A spending plan can help you:
Put aside money for savings goals
Prepare for regular expenses
Prepare for unexpected expenses
Control how you spend money
Reduce stress and increase confidence
Provide an excuse to calm excessive spending
Reasons to budget are numerous:
To determine how much money you have to spend
To decide how you want to spend your money
To determine how to spend money in the future
To learn to live on less than available income
To stay out of financial trouble

47. Consequences of NOT Using a Spending Plan
No idea where money has been spent
Bad spending habits are unidentified
Unprepared for emergencies
Strained relationships
Lack of savings plan
Wasted money
Stress

48. Opportunity Cost of Spending Plans
Consumers may feel like having a budget is confining or restrictive, but it actually gives them more freedom and more options.
By paying attention to where money is spend, wiser choices can be made.
With more freedom, more options, wiser choices, more money can be spent on items of value.

49. Before creating a spending plan…
Track your spending.
Before making a budget, spend a couple of weeks writing down every penny you spend.
This will help you have a better idea of where your dollar amounts should be when making a budget.

50. Budget Breakdown

51. How do I make a spending plan?
Assess your personal financial situation (needs, values, life situation).
Set personal and financial goals.
Create a budget for fixed and variable expenses based on projected income. (Pay Yourself First)
Monitor current spending (saving, investing) patterns.
Compare your budget to what you actually spent.
Review financial progress and revise budget amounts.
Building a budget takes a little time. But it’s absolutely vital to financial health.
Track your expenses for a month to start a budget. What did you buy? What bills did you pay? Basically, where did your money go? Then categorize your spending into groups such as clothing, food, music downloads, auto, etc. Think of other areas in which you might spend money on a regular basis. Don’t forget to include some money for savings.
Identify your income. Only include regular sources of income such as paychecks and allowances. If you get paid monthly or semi-monthly, it is easy to calculate your monthly income. If you get paid weekly or biweekly, multiply your weekly income by 52 or 26 respectively to get your annual salary. Then divide by 12 to get your monthly income. Now that you have your expenses and income quantified, it’s time to examine and fine-tune your budget.
Subtract expenses from income. This is to determine how much money you have left over at the end of the month. If you have more income than expenses, that’s good. If you spend more money than you earn, you’re going to have to decrease your expenses or increase your income. Keep in mind it’s easier to decrease your expenses.
Timing is important. If you get paid once a month, be sure to budget money to last the whole month. If you get paid twice a month, but you have several large expenses at the beginning of the month, make sure you save some of your money from the end of the month to help with the next month’s bills.
Be prepared for new financial situations. When something changes, some part of your income or your expenses, you’ll know how it affects your overall financial picture, and what you need to do to cope with the changes.
Maintain your budget. Each month be sure to compare your actual spending with your budget. If you consistently spend more or less than your budgeted amount in any category, update your budget to reflect reality. An inaccurate budget can do more harm than good.
From PracticalMoneySkills.com

52. More expenses than income?
Negative cash flow
Negative cash flow typically results in debt.
Part of being financially independent is spending less than you earn.

53. To Reduce Negative Cash Flow:
Reduce Spending
Doing comparison shopping
Using coupons
Avoiding impulse purchases
Buying items “on sale”
Carpooling, walking, or riding a bike
Eating at home
Eliminating/reducing impulse purchases – vending machines, convenience stores, etc.
Shopping at thrift stores
Wearing hand-me-down clothes
Using “frequent shopper” cards

54. To Reduce Negative Cash Flow:
Increase Income
After school/weekend job
Additional chores around the house
Yard work
Babysitting
Summer job
Dogwalking
Housesitting
Garage sale
Provide a service

55. Guidelines for a Budget
Housing & Utilities 30%
Food & Household 20%
Clothing & Personal 10%
Transportation 10%
Saving & Investing 10%
Miscellaneous 20%

56. REMEMBER!!!
It is important to remember that budgets can and should change from time to time.
After following a budget for a month, re-evaluate it and make changes as necessary.

57. Large purchases
When adjusting a budget, consider future large purchases and consider saving up for that item and paying cash for it.
When a home or automobile is purchased, other budget categories, such as entertainment and clothes, may need to be cut back in order to compensate for the larger purchase.

58. Budgeting Tools

59. Envelope System

60. Envelope System Each envelope is labeled for the category of spending.
Each pay period, a pre determined amount of money is placed in each envelope for each category.
Each time money is spent from an envelope, the transaction details (date, vendor, amount, etc.) is recorded on the outside of the envelope.
When the envelope is empty, spending ceases!

61. On Paper

62. Paper Tracking
Always record transactions in a check register or on the outside of the envelope for each category.

64. Computers

65. Computer Program
Inform students that there are computer programs available to manage spending and income.

66. RECONCILE Reconcile this. Fee 5 00 679 23 215 45 29 218 64 75 110 04
RECONCILE
Reconcile this.