1. Lesson 2 In the Aftermath

2. Lesson 2: In the Aftermath
Lesson Objectives
Students will:
Adopt strategies for managing important documents.
Analyze various deposit accounts.
Compare and contrast the various banking tools.
Demonstrate skill in basic financial tasks.
Evaluate types of financial institutions.
Explore the benefits of a positive relationship with financial institutions.
Identify types of important documents. 2

3. What would you need if there were an emergency?
Lesson 2: In The Aftermath
What would you need if there were an emergency?
Are there personal items that you would take? How much money would you need? How would you access your money? What important documents would you need? 3

4. Lesson 2: In The Aftermath4

5. What Did Nick’s Family Take When They Fled New Orleans?
Lesson 2: In The Aftermath
What Did Nick’s Family Take When They Fled New Orleans?
What personal items did Nick take?
What important documents did they bring?
How did they access their money?
Why didn't they have to take cash with them?
How did their emergency preparations help once they returned home? 5

6. Emergency Fund An emergency fund is:
Lesson 2: In The Aftermath
Emergency Fund
An emergency fund is:
Money set aside that can be accessed quickly for unexpected expenses.
Vital for emergencies including natural disasters and unexpected life situations.
Generally 3-6 months of living expenses.
For example: If your living expenses are $1,000 a month, you will need a $3,000– $6,000 emergency fund. 6

7. Banking Relationships
Lesson 2: In The Aftermath
Banking Relationships
Establishing a positive relationship with a financial institution can help you:
Develop sound financial management.
Create financial stability.
Plan for emergencies. 7

8. Financial Institutions and the Fed
Lesson 2: In The Aftermath
Financial Institutions and the Fed
Federal Reserve Bank
Commercial Bank
Credit Union
Central bank of the United States
For-profit business with the goal of making a profit for shareholders
Not-for-profit organization
A bank for banks and the U.S. government. Provides payment services for banks
A bank for consumers and businesses
A financial institution for members (not open to general public) with a common bond (e.g., they work at the same place)
Along with other federal and state regulators, supervises and regulates financial institutions
Accepts deposits and makes loans
Responsible for U.S. monetary policy
Provides a variety of services (demand deposits, saving, investing, and loans)
Insured by Federal Deposit Insurance Corporation (FDIC)—$250,000 on checking, savings, CDs, and money market deposit accounts
Insured by National Credit Union Administration (NCUA)—$250,000 on checking, savings, CDs, and money market deposit accounts 8

9. Types of Deposit Accounts
Lesson 2: In The Aftermath
Types of Deposit Accounts
Checking Account
Savings Account
Certificate of Deposit (CD)
Money Market Account (MMA)
Most common form of demand deposit
(money available on demand)
Designed to help save money
Deposit locked in for a specific amount of time and interest rate
Offers variable interest rates
Designed for frequent transactions
Often used for emergency fund and other short-term savings goals
Often used for intermediate-term savings goals
Generally offers higher rates of return on deposits
Uses money you have available in your bank account
May have minimum balance requirements and withdrawal restrictions
Minimum opening balance requirements
Minimum balance requirements
May have monthly fees
Penalties for early withdrawals
May earn interest
Earns interest
FDIC- or NCUA-insured 9

10. LIQUIDITY CHALLENGE Money Market Account 4 Certificate of Deposit 5
Lesson 2: In The Aftermath
LIQUIDITY CHALLENGE
HOW QUICKLY CAN YOU ACCESS YOUR MONEY IN AN EMERGENCY?
Rank these financial tools from most to least liquid:
Money Market Account 4
Certificate of Deposit 5
Savings Account 3
Cash 1
Checking Account 2 10

11. LEARNING MORE ABOUT DEPOSIT ACCOUNTS
Lesson 2: In The Aftermath
LEARNING MORE ABOUT DEPOSIT ACCOUNTS
What is the minimum balance to open?
How much do you have to deposit to avoid fees?
What fees are associated with the account?
What is the annual percentage yield (APY) on the account?
How much interest would you earn monthly? Quarterly? Yearly?
Checking Account
M =
Q =
Y =
Savings Account
Certificate of Deposit
Money Market Account 11

12. WHERE WOULD YOU PUT THE MONEY?
Lesson 2: In The Aftermath
IT’S IN YOUR HANDS:
WHERE WOULD YOU PUT THE MONEY?
SCENARIOS
Scenario #1:
You received your monthly allowance and will need to pay for incidentals like gas and fast food.
Scenario #9:
You are saving $50 a week from a summer job for college in a few years.
Scenario #7:
You receive an income tax refund in the amount of $500.
Scenario #6:
You receive your paycheck and need to pay your monthly bills.
Scenario #4:
You are 30 years old with a steady job. After paying bills, you have $500 left over.
Scenario #8:
Your retired grandparents are searching for a safe way to keep $5,000 and have ready if they need it.
Scenario #5:
You are in college and have a job. Money is tight, but you have managed to save $1,000.
Scenario #2:
You receive a dividend from your money market account of $50.
Scenario #3:
You receive a $100 birthday gift from a relative.
Checking
Savings CD
MMA
1. Allowance
3. Birthday gift
7. Tax refund
2. Dividend
6. Pay bills
Money left after bills are paid
9. Summer savings
8. Grandparents
5. College money 12

13. Benefits of Checking Accounts
Lesson 2: In The Aftermath
Benefits of Checking Accounts
Convenience Flexibility Reliability Direct deposit funds available the same day Security Variety of account tools 13

14. Lesson 2: In The Aftermath
Check
A check is a written set of instructions to your financial institution.
Transfers money from your account to another account
Has blanks that you fill in to tell your financial institution:
The date you want to transfer the funds
To whom you want the funds to go
The amount of money you want to transfer
That you authorize the transfer (by signing the check)
1-1-14 1 2
100.00
One hundred and no/100
John Smith 3
Jane Doe 4 14

15. CHECK CHECK MICR LINE MICR = Magnetic Ink Character Recognition
Lesson 2: In The Aftermath
CHECK
CHECK MICR LINE
MICR = Magnetic Ink Character Recognition
Dollar value of check
(added at retailer or financial institution)
Bank routing number
Check number
Account number 15

16. Electronic Check Conversion (ECC)
Lesson 2: In The Aftermath
Electronic Check Conversion (ECC)
Check MICR line
The MICR line is used as a source of information, providing the: 1) check number, 2) account number, and 3) financial institution routing number.
The information is used to make a one-time electronic payment from your account—an electronic funds transfer.
Many big box retailers and doctor offices use ECC.
Source: “When Is Your Check Not A Check?” Federal Reserve Board Of Governors ( ) 16

17. Restrictive Endorsement
Lesson 2: In The Aftermath
CHECK ENDORSEMENTS
Blank Endorsement
Restrictive Endorsement
Special
Endorsement
John Smith
For Deposit Only
Pay To The Order Of
John Smith
Lisa Reynolds
John Smith
You sign your name the same way it appears on the front of the check.
Do not sign your check with a blank endorsement until you are about to either cash or deposit it. If you do, someone else could try to cash your check.
Anyone can cash the check once you endorse it with a blank endorsement.
This is a safer method to endorse your check, and recommended if you are mailing the deposit or someone else is depositing the check into your account for you.
Write the phrase "For Deposit Only" and sign your name underneath.
The check may only be deposited to your specific bank account.
This method allows you to sign your check over to someone else (a third party), who can then deposit or cash it.
Write "Pay to the order of" and then the name of the person to whom you are giving the check.
Then sign your name underneath. 17

18. Lesson 2: In The Aftermath
DEPOSIT SLIP
1217
809
1-1-14
Deposit Scenario
You have the following items for deposit:
Cash = $50 Check 1217 = $20 Check 809 = $10
How would you complete the deposit slip? 18

19. Automated Teller Machine (ATM) Card
Lesson 2: In The Aftermath
Automated Teller Machine (ATM) Card
An ATM card can only be used with a personal identification number (PIN) at an ATM. ATM fees may be charged when the cardholder uses the ATMs of other financial institutions. 19

20. Lesson 2: In The Aftermath
Debit Card
A debit card is used for cash withdrawals, deposits, and transfers. It is also used with a PIN at an ATM (checking or savings account). When used for purchases, the transaction looks like a credit card transaction, but the purchase amount is deducted directly from your checking account. 20

21. Online Banking Online banking:
Lesson 2: In The Aftermath
Online Banking
Online banking:
Works as an organizational and financial management tool.
Allows consumer to view account balances, see recent transactions, make transfers between accounts, and make payments.
Offers a variety of options, depending on specific financial institution.
Includes online bill pay.
Enables scheduled payments. 21

22. Mobile Banking Mobile web browser Pay bills and transfer funds
Lesson 2: In The Aftermath
Mobile Banking
Mobile web browser
Pay bills and transfer funds
Send money to other bank customers
Explore detailed account activity
Smartphone apps
Deposit checks
Manage account and review activity
Text banking
See account balances
Review recent account activity
Transfer funds 22

23. EVOLVING ACCOUNT TOOLS
Lesson 2: In The Aftermath
EVOLVING ACCOUNT TOOLS
Banking and account tools are continually evolving.
Smart chips
Fingerprint technology
What’s next?
Understand the potential responsibilities and risks of the financial tools you use.
portalsandrails.frbatlanta.org/2013/05/which-is-riskier-change-or-avoiding-it.html 23

24. Electronic Deposits Direct deposit
Lesson 2: In The Aftermath
Electronic Deposits
Direct deposit
An electronic deposit of funds (such as paychecks) to your account
Benefits:
Availability of funds the same day as the deposit
Convenience
Reliability
Security
Flexibility
ATM and mobile banking deposits
No deposit slip necessary
Completed at an ATM or by smartphone 24

25. CHECKING ACCOUNT REGISTER
Number
Date
Transaction Description
Deposit Credit (+)
Payment
Fee Withdrawal (-)
$ Balance
Beginning Balance
612.04
181
4/1
 Books
15.00
597.04
182
4/3
 Donation to XYZ
17.00
580.04
Cash
ATM withdrawal
40.00
540.04
4/4
20.00
520.04
4/5
500.04
Transfer
4/8
Transfer from savings
1,200.00
1,700.04
183
4/10
Utilities payment
217.54
1,482.50
Fee
4/15
Monthly maintenance fee
3.50
1,479.00
Deposit
4/16
ATM deposit
521.78
2,000.78
184
4/20
House payment (mortgage)
1,232.27
768.51
185
Gym membership fee
25.00
743.51
186
4/21
Cell phone payment
54.47
689.04
4/27
Direct deposit (paycheck)
258.90
947.94
187
4/28
 Personal loan payment
53.97
893.97
5/1
ATM Deposit
50.00
943.97 25

26. RECONCILING YOUR ACCOUNT
Number
Date
Transaction Description
Deposit Credit (+)
Payment
Fee Withdrawal (-)
$ Balance
Beginning Balance
612.04
181
4/1
 Books
15.00
597.04
182
4/3
 Donation to XYZ
17.00
580.04
Cash
ATM withdrawal
40.00
540.04
4/4
20.00
520.04
4/5
500.04
Transfer
4/8
Transfer from savings
1,200.00
1,700.04
183
4/10
Utilities payment
217.54
1,482.50
Fee
4/15
Monthly maintenance fee
3.50
1,479.00
Deposit
4/16
ATM deposit
521.78
2,000.78
184
4/20
House payment (mortgage)
1,232.27
768.51
185
Gym membership fee
25.00
743.51
186
4/21
Cell phone payment
54.47
689.04
4/27
Direct deposit (paycheck)
258.90
947.94
187
4/28
 Personal loan payment
53.97
893.97
5/1
ATM Deposit
50.00
943.97 26

27. Lesson 2: In The Aftermath
Overdraft
It is important to take personal responsibility for your finances.
OVERDRAFT FEES
Charges per transaction can range from $20 to $40.
Example:
Your account balance is $100.
You write a check for $150.
Your account is overdrawn for $50.
Your bank charges you $30 in overdraft fees.
Your account balance is now -$80.
Overdraft protection—opt in or out. 27

28. Choosing and Establishing a Relationship with a Financial Institution
Lesson 2: In The Aftermath
Choosing and Establishing a Relationship with a Financial Institution
CRITERIA TO CONSIDER Location Accessibility Account options Meets your financial needs 28

29. Traditional versus Nontraditional Financial Institutions
Lesson 2: In The Aftermath
Traditional versus Nontraditional Financial Institutions
Why use a traditional financial institution rather than a nontraditional option like check cashing stores?
The traditional financial institution:
Likely has lower fees.
May have accounts that earn interest.
Offers better safety and security.
Insures deposits.
Offers more products and services.
Provides monthly statements to help manage expenses and savings. 29

30. Lesson 2: In The Aftermath
IN Summary
Adopting strategies for managing important documents can help your family recover from an emergency more quickly.
Establishing a positive relationship with a financial institution helps develop sound financial management, create financial stability, and plan for emergencies.
Benefits of checking accounts include convenience, flexibility, reliability, direct deposit funds available the same day, security, and offer a variety of account tools. 30

31. Katrina’s Classroom was developed by a team of Senior Economic and Financial Education Specialists at the Federal Reserve Bank of Atlanta. Claire Loup, New Orleans Branch  Julie Kornegay, Birmingham Branch  Jackie Morgan, Nashville Branch For additional classroom resources and professional development opportunities, please visit www. frbatlanta.org/edresources 31

32. Budgeting 32

33. Managing Your Money: The Budget
Lesson 4: Back to School
Managing Your Money: The Budget
What is a budget?
A budget is a plan that helps you manage your money by helping you balance your income with your expenses.
It is an itemized summary of probable income and expenses for a given period.
Why create a budget?
A budget helps you understand where your money goes.
It helps you live within your means and meet your goals.
It helps you find uses for your money that will increase your wealth.
It puts you in control of your money. 33

34. Managing Your Money: The Budget
Lesson 4: Back to School
Managing Your Money: The Budget
Review & Adjust
Determine
Income
Implement
& Track
Identify Expenses
& Track Spending
Develop the
Budget Plan 34

35. The Budget: Determine Income
Lesson 4: Back to School
The Budget: Determine Income
Calculate your income.
Identify all income sources.
Wages/salaries
Gifts or allowance
Interest
Scholarships, grants, and student aid
Understand the difference between net and gross income.
Determine
Income 35

36. The Budget: Identify Expenses And Track Spending
Lesson 4: Back to School
The Budget: Identify Expenses And Track Spending
Determining Your Expenses
Consider all expenses.
Determine which are fixed and which are variable expenses.
Expense Considerations
Know what you owe.
Consider your ongoing needs.
Plan other expenditures.
Identify how much money you need to cover expenses.
Expect the unexpected.
Identify Expenses
& Track Spending 36

37. TRACKING YOUR EXPENSES
Lesson 4: Back to School
TRACKING YOUR EXPENSES
WHERE DID YOUR MONEY GO? Example purchase On what? A large caramel latte Where? Specialty coffee store How much? $4.75 How paid? Cash 37

38. Activity: Tracking Your Expenses
Lesson 4: Back to School
Activity: Tracking Your Expenses
Track daily expenses for the past two days
Date
Item Purchased/
Expense
Amount
Payment Method
Cash, Check, ATM/Debit Card, Credit Card, Autodraft, etc.
Fixed or Variable Expense
10/1
Car payment
$250
Autodraft
Fixed
Gas
$40
Debit card
Variable
10/2
Car insurance
$150
Check
Lunch $5
Cash 38

39. Activity: Tracking Your Expenses
Lesson 4: Back to School
Activity: Tracking Your Expenses
DEBRIEFING
What types of goods and services did you purchase?
What types of payment methods did you use?
Did the way you paid affect how much you spent?
Which expenses were fixed and which were variable?
Any surprises regarding how much you spent?
What income did you have that paid for these expenses?
Did tracking make you rethink any of your purchases?
What influenced your spending—people, situation, emotion?
How did the purchase make you feel? What about now? 39

40. The Budget: Develop the Budget Plan
Lesson 4: Back to School
The Budget: Develop the Budget Plan
Information already gathered:
Income
Fixed and variable expenses
Other considerations:
Pay yourself first—savings
Consider your goals
Budget shortfalls
Develop the
Budget Plan 40

41. Create a Budget How much money do you get each month? Income $2,000
Lesson 4: Back to School
Create a Budget
How much money do you get each month?
Income $2,000
What expenses do you have each month?
Fixed Expenses
Rent $ 600
Cell Phone $
Car insurance ($300/quarter) $ 100
Variable Expenses
Food (estimate) $ 500
Utility bills (estimate) $
Gas $
Total Expenses $1,540
Income
Fixed Expenses
Variable Expenses 41

42. Activity: Budget Scenarios
Lesson 4: Back to School
Activity: Budget Scenarios
In this activity, you will work in groups to allocate $2,000 to a monthly budget estimate.
You will then take turns drawing scenario cards to see how close you came to estimating expenses.
Once you have drawn all of the cards, answer the questions at the bottom of the worksheet. 42

43. Activity: Budget Scenarios
Lesson 4: Back to School
Income
Estimate
Actual
Net income
Fixed Expenses
Rent
Renter’s insurance
Automobile loan payment
Automobile insurance
Medical insurance
Student loan
Total Fixed Expenses
Variable Expenses
Groceries
Dining out
Utilities
Gasoline
Car maintenance
Clothing and personal upkeep
Gifts
Entertainment
Savings
Total Variable Expenses
Total Expenses
SURPLUS (DEFICIT)
$2,000
$450
$25
$250
$75
$100
$325
$1,225
$200
$75
$125
$75
$75
$25
$100
$10
$75
$760
$1,985
$15 43

44. Activity: Budget Scenarios
Lesson 4: Back to School
Activity: Budget Scenarios
DEBRIEFING
How did your group’s estimates differ from the scenarios?
How much did you estimate as savings each month?
Were there expenses on this budget that were not listed in the categories provided?
If you had to pay for these expenses, where would the money come from? 44

45. The Budget: Implement and Track
Lesson 4: Back to School
The Budget: Implement and Track
Implement the budget.
Continue to track spending.
Implement
& Track 45

46. The Budget: Review and Adjust
Lesson 4: Back to School
The Budget: Review and Adjust
Review the budget at least monthly.
Make necessary adjustments for your situation.
Consider the following in your review:
Have income sources changed?
Does your income cover your expenses?
Where and when are you spending money?
Are you saving regularly?
Has anything affected your income, spending, and saving?
Are you achieving your personal and financial goals?
Review & Adjust 46