Presentation on theme: "Chapter 19 Managing Money"— Presentation transcript:
1Chapter 19 Managing Money American Civics4/14/2017Chapter 19 Managing MoneySection 1: Money and CreditSection 2: Banks and BankingSection 3: Saving and InvestingSection 4: Insurance Against HardshipChapter 19
2Section 1: Money and Credit The Main IdeaIn addition to using dollar bills and coins, individuals and businesses use checks, debit cards, and credit to pay for their purchases.Reading FocusWhat are the three basic characteristics of currency?Why do people and businesses accept checks as payment?How is credit important to individuals and families?How is business credit useful to the economy as a whole?
3Four basic characteristics of currency: Section 1: Money and CreditFour basic characteristics of currency:Must be easy to carry and take up little spaceBased on system of units easy to multiply and divideMust be durableMust be in a standard form and guaranteed by the government
4Why do people and businesses accept checks? Section 1: Money and CreditWhy do people and businesses accept checks?Much of the U.S. money supply is in the form of bank deposits.A check is a promise of funds sufficient to cover stated amount.Insufficient funds and overdrafts are punished with fines or criminal penalties.
5The Importance of Credit Section 1: Money and CreditThe Importance of CreditCredit allows wholesalers to buy a larger quantity of goods at once.Families use credit for emergency purchases and large purchases.Credit enables consumers to buy when production is high and goods are being sold.Consumer spending encourages economic growth.
6SECTION 1Question: How is credit good for families and the economy as a whole?Importance of CreditIn the FamilyIn BusinessIn the Economylarge purchases on long-term creditlarge purchases on short-term creditproducts or services needed immediatelyused for emergency expensesused in most sales of large amounts of goodsallows wholesalers to buy larger quantities than they have money forwholesaler can make money to repay debtmakes it possible for consumers to buy whenever there are goods to be sold, even if money supply is lowwhen production slows, banks can slow consumer spending by extend-ing less credit and raising interest rates on loans
7Section 2: Banks and Banking The Main IdeaBanks provide a safe place to keep money and help businesses and individuals by making loans.Reading FocusHow and why were the first banks established?What is the purpose of banks and the banking system?How and why does the U.S. Federal Reserve System regulate the amount of money in circulation?How does a person get a bank loan?
8The FDIC: Section 2: Banks and Banking FDIC—Federal Deposit Insurance CorporationA government agencyInsures accounts in commercial and savings banks for up to $100,000
9The savings and loan crisis: Section 2: Banks and BankingThe savings and loan crisis:1980s—many of the banks involved in risky loans, bad investments, and fraudHundreds of the banks failedThe FSLIC ran out of money, and debt was passed on to the FDIC.The Resolution Trusts Corporation was established to sort out the crisis.1999—cost to taxpayers estimated at $165 billion
10The Federal Reserve System regulates the money in circulation: Section 2: Banks and BankingThe Federal Reserve System regulates the money in circulation:Regulation prevents bank failure.The Fed controls money circulation to keep the economy healthy.The Fed buys government bonds from banks and individuals to increase circulation and speed economic growth.The Fed sells government bonds to take money out of circulation when economy grows too fast.Member banks can borrow money from the Fed to increase their reserves.
11Savings and Loan Crisis SECTION 2Question: What were the causes and effects of the savings and loan crisis in the 1980s??CausesEffectsrisky loansbad investmentsfraudThe FSLIC runs out of money.The Resolution Trust Corp. (RTC) is formed.The total cost to taxpayers is nearly $165 billion.The FDIC takes on FSLIC’s obligations.Savings and Loan Crisis
12Section 3: Saving and Investing The Main IdeaThere are many ways to save money. Saving helps the economy by providing banks with money to make loans to others.Reading FocusWhy is it important to save money?What are some ways people save and invest their money?How does saving money help the U.S. economy?How does the government protect savings and investments?
13The importance of saving money: Section 3: Saving and InvestingThe importance of saving money:People save for education, emergencies, retirement, and large purchases.Credit purchases often require a down payment in cash.Ability to make a large down payment reduces monthly payments and the total interest on a loan.
14Ways of saving and investing: Section 3: Saving and InvestingWays of saving and investing:Purchasing items that may increase in valueRegular installments to a savings account that is earning interestCertificates of deposit (CDs)—interest is paid when CD maturesStocks—common and preferred stock; mutual funds; money market fundsBonds—low risk; money and earned interest is returned when bond matures
15Saving money helps the U.S. economy: Section 3: Saving and InvestingSaving money helps the U.S. economy:Expansion of the economy requires capital; money in savings is used for expansion.Money saved is also money invested in the economy.Companies’ ability to raise capital promotes the country’s prosperity.Banks use money in savings to make loans to businesspeople.Businesses that save are able to reinvest in themselves.
16SECTION 3Question: What are the different ways of saving and investing money?PayBills & ExpensesSavingssavings accountsStocksBondspreferredcommonmutual fundsgovernmentcorporateregular savingsNOW accountsCDsmoney marketSavings Used forchildren’s educationemergenciesretirementlarge purchases
17Section 4: Insurance Against Hardship The Main IdeaInsurance companies offer policies to protect people from possible financial hardships. The federal government also has several programs to help protect people from risks and uncertainties.Reading FocusHow are insurance companies able to protect you?What are some forms of insurance provided by the government?
18Insurance companies cover many people: Section 4: Insurance Against HardshipInsurance companies cover many people:Premiums are collected from millions of policyholders.Money is held in a reserve fund.Laws specify how much must be held in the fund.Claims are paid from the fund.Relatively few policyholders make claims each year.Other moneys are invested and profits are used to run the company.
19Private Insurance and Social Insurance Section 4: Insurance Against HardshipPrivate Insurance and Social InsurancePrivate insurance—voluntary insurance paid by individuals and companies: life insurance, health insurance, property and liability insuranceSocial insurance—government programs meant to protect individuals from future hardships: Social SecuritySocial Security includes old age, survivors, and disability insurance, unemployment compensation and workers’ compensation
20Social Security and Its Future Section 4: Insurance Against HardshipSocial Security and Its FutureSocial Security Act of 1935—part of the New Deal; intended to protect citizens from future hardshipsRetirement population is growing while birthrate is dropping.Fewer workers will be supporting growing group of retirees.Critics argue the tax will continue to rise and prefer to abolish the program.
21SECTION 4Question: What are the different types of services and coverage available under private and social insurance?Social InsuranceOld Age, Survivors, and Disability InsurancePrivate InsuranceLife InsuranceUnemployment InsuranceDisability IncomeHealth InsuranceWorkers’ CompensationProperty InsuranceLiability InsuranceMedicare and Medicaid
22Chapter 19 Wrap-Up1. Why are checks not considered legal tender, and why do people accept them for payment?2. How do charge cards differ from credit cards?3. What caused the savings and loan crisis of the 1980s?4. What are the duties of the Federal Reserve System?5. How does saving money help the economy grow?6. What options does an individual have if he or she wants to save or invest money?7. What enables insurance companies to stay in business while still charging the premiums that they do?