5 Types of Financial Institutions Commercial Banks (ex. Wells Fargo)Savings and Loan AssociationsCredit Unions (ex. America First Credit Union)Internet Banks (ex. Ally Bank)Mutual Fund CompaniesBrokerage Firms
6 Why we have them To not carry as much cash Security Credit/Loans FDIC: Federal Deposit Insurance CorporationNCUA: National Credit Union AdministrationCredit/LoansInvestment returnsConvenienceSpending Plan Tool- helps track where the money goes
9 Comparison Shopping Not all checking accounts are created equal. Things to consider:ServicesLocation of ATMsBanking hoursMinimum balance requiredMinimum transactions or limitsInterest-bearing accounts?CostsNon-primary bank ATM transactionsPer-check feesIn-branch transaction feesOverdraft protectionPrinting of checks
10 Opening an AccountNeed proof of who you areMinimum balance
11 OPENING A CHECKING ACCOUNT Consider providing copies of this application handout, which can be found in the Citigroup Financial Education Curriculum: “Basic Banking Services”, p. 44.Use “Slide 1: Opening a Checking Account and “Slide 2: Commonly Accepted Forms of ID” to review with the participants the type of application they will probably see when opening a checking account.• Move through the application, describing the various areas on the form.• In reviewing the application, stress the need for accuracy and clarity in all information.• Emphasize that applicants must provide a physical address when their mailing address is a post office box or similar postal receipt area.The same information is asked of a joint applicant.11Slide 1 – Opening a Checking Account Lesson Reference: Basic Banking Services, Activity 4 – Handout 1
12 COMMONLY ACCEPTED FORMS OF ID Primary ID*Photo Driver’s License issued within the U.S. or CanadaState Non-Driver Photo IDPhoto Learner’s PermitGovernment Photo IDU.S. PassportNon-U.S. PassportResident Registration CardMexican Consular ID (Matricula Consular)Naturalization CertificateEmployee Photo ID (from a recognizable employer)Photo Trade License (barber, plumber, electrician, etc.)Student Photo ID (college/trade school)Medicare Card (must be 65 or older)A major topic to emphasize is proper identification. Although acceptable identification may vary among financial institutions, it always includes as least two types of current government-issued identification.• Such regular identification might include a driver’s license, military ID, passport, green card, etc. In some states, a Mexican consulate card is an acceptable form of identification to open a bank account.Review this slide and emphasize that this is a list of commonly accepted forms of primary ID, and that secondary ID is required (reviewed on next slide).* Financial institutions' ID requirements may differ; check with the institution first before applying for an account.12Slide 2 - Commonly Accepted Forms of ID Lesson Reference: Basic Banking Services, Activity 4 – Handout 2
13 COMMONLY ACCEPTED FORMS OF ID Secondary ID*Foreign Driver’s LicenseState/Local Gun PermitUtility Bill (Name and address of individual account should be listed)Current Bank StatementNational Credit CardBank-issued Debit or Check CardPay StubCar RegistrationMortgage StatementLetter of Introduction from Bank, Embassy, or well-known EmployerWelfare CardSupplemental Health Insurance Card• Review this list of commonly accepted forms of secondary ID.Taxpayer Identification Numbers (TIN): Social Security Numbers can be used to open basic bank and credit accounts, while Individual Taxpayer Identification Numbers (ITIN) may be used to open noncreditaccounts. Talk with your local bank or credit union about these requirements.• Be prepared. Call ahead to find out exactly what you will need to open an account and what hours the bank is open.* Financial institutions' ID requirements may differ; check with the institution first before applying for an account.13Slide 3 - Commonly Accepted Forms of ID Lesson Reference: Basic Banking Services, Activity 4 – Handout 2
14 THE PATRIOT ACTCongress passed the PATRIOT Act in response to the terrorist attacks of September 11, Financial institutions are now required to collect certain information when a new account is opened.1. The customer must provide identification that includes name, date of birth, address, and identification number.2. The institution must maintain a copy of the information used to verify the person’s identity.3. The institution must determine whether the applicant appears on the lists of known or suspected terrorists or terrorist organizations.Display “Slide 4: The PATRIOT Act.” Explain what the PATRIOT Act is and why it was created. Walk through the points on the slide, explaining what types of information financial institutions are now required to collect when a customer opens an account.There are often misconceptions about the PATRIOT Act.• Some believe that the PATRIOT Act prohibits banks from opening accounts for people without a Social Security number. Explain to participants that many institutions accept a range of documents as outlined in slide 2; it may not be necessary to have a Social Security number to open an account.• Another common myth is that undocumented immigrants can’t obtain legitimate credit or build a credit history. This is untrue. A growing number of financial institutions accept alternatives to the Social Security number to issue credit cards or loans. Additionally, lenders may report the borrower’s repayment information to the major credit reporting agencies using the Individual Taxpayer Identification Number (ITIN).This law was enacted to fight terrorism; it will not impact the safety of your money. Be assured that the money you deposit in a bank is safe; it is insured up to $100,000 per depositor by the Federal Deposit Insurance Corporation.14Slide 4 – The PATRIOT Act Lesson Reference: Basic Banking Services, Activity 4 – Overhead 1
15 SIGNATURE AUTHORIZATION CARD Use “Slide 5: Signature Authorization Card” to review and describe the areas on the card. Explain the purpose of the signature authorization card and how the bank uses it to help safeguard customers’ money.Ask those who have a checking account how they make their deposits. Responses may vary, but should include depositing the funds at the bank, through the mail, at an ATM, and direct deposit.Encourage participants to consider the option of direct deposit.• Ask if anyone uses the option. If so, have them explain.• Suggest that they contact their local banker to learn more about setting up direct deposits.Ask what might be the advantages of using direct deposit. Responses may vary but should include safety and convenience.15Slide 5 – Signature Authorization Card Lesson Reference: Basic Banking Services, Activity 4 – Handout 3
16 Terms to Know Bank statement Cancelled Check Endorsement Fee Interest Minimum BalanceOverdraft ProtectionTransaction Limits
17 Terms to Know Bank statement- monthly record of all account activity Cancelled Check- a check that has been stamped to show it has been deposited (or cashed) and taken out of another’s accountEndorsement- signing a check for depositFee- charges for certain bank servicesInterest- money paid to saversMinimum Balance- requirement to keep a certain amount in an accountOverdraft Protection- an agreement to transfer funds from another account to a checking account to cover insufficient fundsTransaction Limits- maximum number of transactions allowed before incurring a fee
18 How it Works You must put a minimum balance in to open an account Services offered depend on the financial institutionAllows you to access your money at any time using checks, debit card, or ATM
19 Debit Card Plastic card that looks like a credit card Electronically connected to a bank accountMoney is automatically taken from the bank account when purchases are madeRequires a PIN (personal identification number)Confirms the user is authorized to access the account
21 Debit Card Account Number—Links all purchases made with the card to a designated bank accountExpiration Date— The debit card is valid and may be used until this dateCardholder’s Name— The cardholder’s full name is written out and displayed.Magnetic Strip— When the debit card is swiped, the magnetic strip automatically withdraws funds from the cardholder’s account.
22 Debit CardAuthorized Signature— Sign in the signature box on the back of the debit card to authorize paymentsShould also write, “See ID” in the signature boxEnsures the person using the card is authorized to do soVerification Number—This three digit code is located on the back of the card in the signature areaHelp ensure the card is in the cardholder’s possession when making purchasesPrevents unauthorized use
23 To Use A Debit CardSwipe it through the store machine or put into an ATMEnter the PINComplete transaction
24 Pros and Cons - Debit Cards Pros ConsConvenientSmallCan be used like a credit cardAllows a person to carry less cashDoes not allow overspendingCan lose track of balance if transactions are not written downOpens checking account up to credit fraudOthers can gain access to the account if the card is lost and PIN is known
26 Parts of a Check Personal Information Check Number Date Bank Name Endorsement LineRouting NumberAccount NumberCheck Number
27 Writing a Check John Smith Halloween Costume Your Name 10/28/13John Smith$100.00One Hundred and 00/100Halloween CostumeYour Name
28 Bouncing a CheckCheck written for an amount over the current balance held in the account‘Bounces’ due to insufficient funds, or not enough money in the account to cover the check writtenA fee will be charged to the account holderHarm future opportunities for credit
29 Check 21 Check Clearing for the 21st Century Act (Check 21) When a check is written, the money is automatically withdrawn from a bank accountMakes “bouncing checks” difficult
31 Basically….Kind of like a checking account, but with higher interest rates.Money cannot be taken out with a check or a debit card, but can be transferred into your checking account.Really good to have!
40 Checking Account Register Place to record all monetary transactions for a checking accountDeposits, checks, ATM use, debit card purchases, additional bank feesUsed to keep a running balance of the accountRememberRecord every transaction!
44 What is a spending plan?A tool used to record and track projected and actual income and expenses over a period of time.Also called a budget.
45 Spending PlansAre simply road maps the help people reach financial goalsNeed to be flexible to change with various life stagesAre not difficult to establish but do take time and commitment.**Recommended to track spending prior to creating a budget.NOTE: There should not be any money left over in a budget. If there is, it should be put into the savings or charitable giving column.
46 Benefits of Spending Plans A spending plan can help you:Put aside money for savings goalsPrepare for regular expensesPrepare for unexpected expensesControl how you spend moneyReduce stress and increase confidenceProvide an excuse to calm excessive spendingReasons to budget are numerous:To determine how much money you have to spendTo decide how you want to spend your moneyTo determine how to spend money in the futureTo learn to live on less than available incomeTo stay out of financial trouble
47 Consequences of NOT Using a Spending Plan No idea where money has been spentBad spending habits are unidentifiedUnprepared for emergenciesStrained relationshipsLack of savings planWasted moneyStress
48 Opportunity Cost of Spending Plans Consumers may feel like having a budget is confining or restrictive, but it actually gives them more freedom and more options.By paying attention to where money is spend, wiser choices can be made.With more freedom, more options, wiser choices, more money can be spent on items of value.
49 Before creating a spending plan… Track your spending.Before making a budget, spend a couple of weeks writing down every penny you spend.This will help you have a better idea of where your dollar amounts should be when making a budget.
51 How do I make a spending plan? Assess your personal financial situation (needs, values, life situation).Set personal and financial goals.Create a budget for fixed and variable expenses based on projected income. (Pay Yourself First)Monitor current spending (saving, investing) patterns.Compare your budget to what you actually spent.Review financial progress and revise budget amounts.Building a budget takes a little time. But it’s absolutely vital to financial health.Track your expenses for a month to start a budget. What did you buy? What bills did you pay? Basically, where did your money go? Then categorize your spending into groups such as clothing, food, music downloads, auto, etc. Think of other areas in which you might spend money on a regular basis. Don’t forget to include some money for savings.Identify your income. Only include regular sources of income such as paychecks and allowances. If you get paid monthly or semi-monthly, it is easy to calculate your monthly income. If you get paid weekly or biweekly, multiply your weekly income by 52 or 26 respectively to get your annual salary. Then divide by 12 to get your monthly income. Now that you have your expenses and income quantified, it’s time to examine and fine-tune your budget.Subtract expenses from income. This is to determine how much money you have left over at the end of the month. If you have more income than expenses, that’s good. If you spend more money than you earn, you’re going to have to decrease your expenses or increase your income. Keep in mind it’s easier to decrease your expenses.Timing is important. If you get paid once a month, be sure to budget money to last the whole month. If you get paid twice a month, but you have several large expenses at the beginning of the month, make sure you save some of your money from the end of the month to help with the next month’s bills.Be prepared for new financial situations. When something changes, some part of your income or your expenses, you’ll know how it affects your overall financial picture, and what you need to do to cope with the changes.Maintain your budget. Each month be sure to compare your actual spending with your budget. If you consistently spend more or less than your budgeted amount in any category, update your budget to reflect reality. An inaccurate budget can do more harm than good.From PracticalMoneySkills.com
52 More expenses than income? Negative cash flowNegative cash flow typically results in debt.Part of being financially independent is spending less than you earn.
53 To Reduce Negative Cash Flow: Reduce SpendingDoing comparison shoppingUsing couponsAvoiding impulse purchasesBuying items “on sale”Carpooling, walking, or riding a bikeEating at homeEliminating/reducing impulse purchases – vending machines, convenience stores, etc.Shopping at thrift storesWearing hand-me-down clothesUsing “frequent shopper” cards
54 To Reduce Negative Cash Flow: Increase IncomeAfter school/weekend jobAdditional chores around the houseYard workBabysittingSummer jobDogwalkingHousesittingGarage saleProvide a service
55 Guidelines for a Budget Housing & Utilities 30%Food & Household 20%Clothing & Personal 10%Transportation 10%Saving & Investing 10%Miscellaneous 20%
56 REMEMBER!!!It is important to remember that budgets can and should change from time to time.After following a budget for a month, re-evaluate it and make changes as necessary.
57 Large purchasesWhen adjusting a budget, consider future large purchases and consider saving up for that item and paying cash for it.When a home or automobile is purchased, other budget categories, such as entertainment and clothes, may need to be cut back in order to compensate for the larger purchase.
60 Envelope System Each envelope is labeled for the category of spending. Each pay period, a pre determined amount of money is placed in each envelope for each category.Each time money is spent from an envelope, the transaction details (date, vendor, amount, etc.) is recorded on the outside of the envelope.When the envelope is empty, spending ceases!