Presentation on theme: "Money Management Chapter 19. Money and Credit Money is anything that a seller will take in exchange for a good or service. To most Americans this includes."— Presentation transcript:
Money and Credit Money is anything that a seller will take in exchange for a good or service. To most Americans this includes cash, coin, check, debit, and credit cards. These things are also known as Currency. The reason our money is worth anything is because our government guarantees it against the many things we produce.
Features of Currency 1. Must be easy to carry and conceal. 2. Must be based on a system of easily divided and multiplied numbers like 5 or 10. 3. Must be durable. Currency can not wear out or become unusable before it can be used. 4. Must be standard issue by a government that is recognized.
Coins and Paper All money must come from the Untied States Mint. The US Mint is the place where our money is made. Located in Philadelphia and Denver. Coins – used to be worth the amount of metal they contained. No longer, they are made up of various cheaper metals.
Cont… Paper money is not actually paper. It is made of cotton. 1, 5, 10, 20, 50, and 100 currently produced and in circulation. 2, 500, 1000, 5000, and 10000 currently not produced, but some exist in circulation. What is the value? The US Government backs the currency with our products and…
GOLD Our gold supply is held at Fort Knox in Kentucky.
Checks Written order to a bank to pay a sum from a person or business account. Non-cash transaction You deposit money into your account and when you write checks the bank removes the money. Works the same way with Debit cards.
Charge Accounts and Credit Cards Credit Cards – substitute for money. These can be used at any store. You use the companies money then pay them back. The customer can pay back the full amount during the grace period, or make payments while accumulating interest. Interest – Money charged by the companies to use their money.
Short Term v. Long Term Credit Short Term - If you have an emergency expense you can borrow an amount of money and pay it off in a small amount of time. Long Term – Money borrowed to make a large purchase. The borrower takes a long time to pay it back in equal installments.
Banks and Banking Banks – a business that deals in money and credit. Deposit – money put into the bank for safe keeping. Withdrawal – money taken out of a bank account. Loans – money borrowed from a bank. Collateral – property used to guarantee a loan.
Types of Banks Commercial Banks – offer savings accounts, checking accounts, and loan services. Savings and Loan Association – began to help people buy homes. Individuals deposited money into a savings account which earned interest. They then provided low interest loans to people buying houses.
Cont… Savings Bank – banks that only offer deposit service. People deposit money and earn interest. Credit Unions – established by people who were in the same organizations or worked for the same company. They offer all banking services at a discount rate.
Payback Loans must be paid back according to the loan agreement. Discounting – a person pays the interest first and receives a lower interest rate. Renewing a Loan – when a person is unable to pay the loan the bank will reissue the loan. With additional interest.
Government Regulations Federal Reserve System – the bank for the US government. Loans money to other banks. Handles the governments banking needs. Not for use by individuals or businesses. The banks who belong to the system can borrow money at a Discount Rate – lower interest rates charged to member banks.
Savings and Investment Everyone tries to save money. For future expenses, a purchase, or just to have extra. Savings can be used to put for a down payment on a major purchase like a car or house. This can lower the repayment amount and the interest rate.
How Do People Save? 1. Banks - most people set aside a regular amount from their paychecks to save. These accounts usually earn interest. 2. Buying Bonds - people can buy savings bonds as an investment. When these bonds mature the money can be withdrawn. 3. Buying Stocks - investing in the stock market can be a good way to make money.
Cont... Brokers - people employed by a brokerage house to buy stocks for individuals. These brokerage houses are members of stock exchanges Risk - you can make a lot of money, but you can also lose everything. Mutual Funds - buy shares of a fund that owns thousands of shares of different companies.
Cont... 4. Certificate of Deposit (CDS) - issued by banks the cd is purchased at an agreed upon price and the money is in the cd until the time is up. The owner then gets their money back plus interest. Usually a guaranteed amount of interest.
Cont... 5. Money Market Fund - like a mutual fund only the person can remove the money whenever, and the investment is more risky. 6. Precious Metal - Gold, Silver, and Jewelry.
Insurance Insurance - a system of paying small amounts monthly to help pay for emergencies later. Home, health, life, flood, earthquake, fire, car, etc… Private Insurance - voluntary insurance. Can cover almost anything that can happen to you.
How Does Insurance Work? The insurance co. takes in millions of premiums. Not everyone uses the insurance. So there is excess money. This allows insurance companies to invest excess premiums (monthly payments) and make money off of them. This guarantees that when you need your insurance it will be there.
Life Insurance Provides the persons family with money when they die. Term - life insurance that pays off during a certain period of time 5, 10, 20 years Life - life insurance that pays off no matter when the person dies. Which one is better for me?
Social Insurance Government provided insurance. Social Security Act of 1935 - establishes social security. This pays three groups 1. Old age / Survivors benefits 2. Unemployment insurance 3. Workmans Compensation
Medicare and Medicaid Medicare Act 1965 - provides health insurance to certain groups of people. Medicare - helps citizens over 65 with medical expenses. Medicaid - helps citizens who cannot afford health insurance