Presentation on theme: "Money & Banking. What is money… Medium of Exchange It is accepted in buying and selling goods and services. Easier than barter Store of value."— Presentation transcript:
Money & Banking
What is money… Medium of Exchange It is accepted in buying and selling goods and services. Easier than barter Store of value It can be set aside for the future and still have value Measure of Value How much is something worth? Allows for easy comparison. A$500 laptop computer is worth more than a $100 printer
Characteristics of Money Durability – won’t wear out or break Portability – easy to carry or move Divisibility – can divide in to practical sizes Uniform- each unit is exactly the same (is a new pencil the same as a used pencil?) Limited Supply/Hard to Counterfeit- the law of supply and demand – if anyone can get it, it has no value. Acceptability- sellers agree to accept it in exchange for their product.
How does money get its value? Commodity – has value in and of itself Wheat – I can use it to make bread or trade it to someone else who wants to make bread. Specie – Coins made of silver and gold or IOUs that can be traded for silver and gold Fiat – legal tender – government orders or decrees that the money has value
Your Turn Evaluate a commodity as a form of money…
Where to keep the money safe??? Bank vs Credit Union A Bank is a for profit company that makes money from charging fees and lending money to its customers. Banks pay taxes. Advantages - more locations, more financial products. A Credit Union is a non-profit cooperative owned and controlled by its members. It serves groups that have something in common, profession, neighborhood… Advantages – lower fees and better interest rates.
How do banks make $$$$ Fees charged for service Loans to its customers House Mortgage Home equity Car/boat Credit Cards
So how about those fees?Choosing an Account FDIC insured Minimum balance Monthly fees Free ATMS (the account provider's ATMS) Check Card Free online banking Ability to set-up direct deposit 24/7 customer service
Pick your account…. Review the two documents Fill in Appendix A Choose an account and explain why
Overdraft protection $100 balance Withdrawals of $120, $15, $5, $3 What would these cost you with overdraft allowed? What would this cost with overdrafts linked to a savings or credit card?
Accessing your money… Filling in a check… Keeping your check register… On-line Bill Pay…
Debit v Credit cards Quick read and questions… What are the advantages of using cash, credit, check, debit card? What are the disadvantages of each?
Protecting your identity How do they do it? How can you protect yourself?
Brainstorm What kinds of loans can you get…
Types of loans… Open – ended loans Can borrow money over and over (credit card) Closed-ended loan Have ending date – 5 year, 15 year… Mortgages and car loans Secured loans Require and asses to be used as collateral – if you default, they take your collateral Unsecured loans No collateral is required – generally has a higher interest rate
Calculating Interest Calculating on a savings account for each year… (see packet) Buying a car: $15,000 car 6% APR 5 year loan What is the Interest?
Who gets the best interest rates? Your Credit score determines your interest rate…