1. Chapter 5 The Banking System

2. Slide 2 What Is the Purpose of a Checking Account? 5-1 Checking Accounts A checking account is a demand deposit account on which checks are drawn. A check is a written order to a bank to pay a person or business.

3. Slide 3 Checkbook Register 5-1 Checking Accounts

4. Slide 4 Making Withdrawals and Deposits 5-1 Checking Accounts A withdrawal involves taking money from your account. o Writing checks o Using debit and ATM cards A deposit of money can be made to your account. o Endorsing checks o Direct deposit

5. Slide 5 How Do You Reconcile a Bank Statement? 5-1 Checking Accounts Bank reconciliation is the process of adjusting the checkbook register and bank statement so they agree. The bank statement lists checks, withdrawals, deposits, service charges, interest, and fees. Consider deposits in transit, outstanding checks, and transposition errors.

6. Slide 6 Building Communications Skills Reading Comprehension Read slowly. Look at the structure of what you are reading. o Example: topic sentences and conclusion sentences Think about the purpose of a paragraph and how it relates to the topic. Take notes or highlight key points. Read passages more than once. 5-1 Checking Accounts

7. Slide 7 What Is the Purpose of Savings? A savings account is a demand deposit account for the accumulation of money. It is a safe place to hold money to meet future needs and wants. It pays interest at a low rate. 5-2 Savings Accounts

8. Slide 8 How Can You Grow Your Savings? 5-2 Savings Accounts Principal is the money set aside on which interest is paid. Simple interest is computed once during a time period. Compound interest is earned on both principal and interest earned previously.

9. Slide 9 Computing Simple Interest 5-2 Savings Accounts P = amount of money set aside R = interest rate T = time 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

10. Slide 10 Computing Compound Interest 5-2 Savings Accounts Quarterly Compounding Annual Interest Rate 6% Beginning Rate Ending YearBalance 6% QuarterBalance 1 2 3 4 1$100.000.015$1.50$1.52$1.55$1.57$106.14 2$106.140.015$1.59$1.62$1.64$1.66$112.65 3$112.650.015$1.69$1.72$1.74$1.77$119.57

11. Slide 11 What Are Your Savings Options? 5-2 Savings Accounts Money market accounts earn the market rate of interest. Certificates of deposit (CDs) pay a fixed interest rate for a time period. U.S. savings bonds pay a guaranteed minimum interest rate. Individual retirement accounts (IRAs) help you save for retirement.

12. Slide 12 Focus On... The FDIC Protects depositors of insured U.S. banks against loss if the bank fails Covers all types of deposits Covers principal and accrued interest Does not insure some items o Examples: stocks, bonds, valuables Insures deposits in different banks separately 5-2 Savings Accounts

13. Slide 13 What Banking Services Are Available to Consumers? Safe deposit boxes Overdraft protection ATMs Cashier’s checks Financial advising Loans Internet banking Bank cards 5-3 Banking Services and Fees

14. Slide 14 What Are the Costs of Banking? 5-3 Banking Services and Fees Monthly account fees Nonsufficient fund fees Special service fees o Examples: stop payment, cashier’s check, money order ATM fees Inactive account fees

15. Slide 15 What Are Consumer Responsibilities? 5-3 Banking Services and Fees 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.

16. Slide 16 Success Skills Understand your position. Understand the other party’s position. Create a proposed solution. Identify what is important and what you are willing to give up. 5-3 Banking Services and Fees Negotiating It is the process of reaching an agreement that benefits both parties.