1. Chapter 4 Study Guide

2. 2. What are two reasons to put your money in a bank?
What is a bank?
a business that stores and manages money for individuals and other businesses
2. What are two reasons to put your money in a bank?
keep it safe
to earn interest
3. Briefly describe the following banks:
Retail bank - Banks that offer basic banking services to individuals
Credit union - non profit banks that offer basic banking services
Commercial banks - provide services to businesses
Investment banks - help businesses and other organizations raise money by issuing stocks and bonds.

3. 5. What are the two main types of bank accounts? checking, savings
4. What is a bank account?
a record of the transactions between you and your bank
5. What are the two main types of bank accounts?
  checking, savings
6. Why do people open savings accounts?
  to save money for future use
7. What do personal checks include?
 Name and address in upper left corner
Check number in upper right corner
Bank information
Routing and Account numbers on the bottom
8. What do some people do when they reach their savings goals?
they might decide to invest some of their savings
9. What do most people invest their money in?
products such as stocks, bonds, or mutual funds

4. 10. In which types of banks do most people open savings accounts?
Retail banks or credit unions
11. What is the difference between passbook and time savings account?
 passbooks earn less interest but are more flexible, time accounts require you to leave your money for a set amount of time
12. Briefly describe money market accounts.
Money market accounts offer a higher interest rate than a passbook savings account. There is usually a minimum balance a limit to amount of times you can withdraw money
13. What are equity investments?
you purchase stocks in a company.
14. What are fixed income investments?
you lend money to a business or government agency in exchange for a bond.
15. What is an IRA?
a personal savings plan that allows you to set aside money for retirement.

5. 18. Describe the following types of life insurance:
16. What is the government program that pays monthly benefits to workers in the U.S. who pay the FICA tax?
Social Security
17. What is insurance?
an investment that protects you financially against everyday risks  
18. Describe the following types of life insurance:
Term life insurance – provides protection for a specific dollar value
Permanent Life insurance – lets you save or invest money in a policy over time 
19. What is the purpose of health insurance?
protects you against the high cost of health care

6. 20. What is estate planning? 21. What does a realtor do?
The process of anticipating and arranging for the disposal of your assets after your death
21. What does a realtor do?
Helps people buy a house from showing, to making an offer, and closing
22. What are things that you should consider when deciding whether to rent or buy a home?
Lifestyle needs, credit history, net worth, current and future income
23. What is a down payment and how much to do people usually put down on a house?
A percentage of the home prices paid up front, usually 3 – 20% 
24. How long do home loans usually last?
15 or 30 years

7. 25. Briefly describe the five parts a mortgage payment:
Principal – amount of loan divided into equal payments
Interest – percentage you pay to get the loan
Points – costs paid to the lender in order to get mortgage financing
Taxes – real estate taxes that are assessed by your community
Homeowners insurance – protects against damage to your home or property
26. What is a premium?
The amount of money paid by the policy holder
27. Describe the following types of insurance:
Renter’s insurance – protects your property if you rent a home
Auto insurance – protects your car from theft or damage
Disability Insurance – protects your income if you are too sick or hurt to work
Dental Insurance – protects you against the cost of dental care