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Personal Financial Management

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Presentation on theme: "Personal Financial Management"— Presentation transcript:

1 Personal Financial Management
Chapter 7: Banking Personal Financial Management

Chapter 7.1

3 Beginning of Banking 1791 First central bank – 8 branches
Today - 11,000 banks, 2,000 savings and loan associations, and 12,000 credit unions.

4 Types of Financial Services
Savings Payment Services Borrowing Other financial services

5 Savings Essential for any personal finance plan.
Time Deposit – money that is left in a financial institution for months or years. Examples: money in any type of savings account and CDs Selection of savings plan should be based on interest rates, liquidity, safety, and convenience.

6 Payment Services Checking Account – most commonly used payment service
Demand Deposit – money that you place in a checking account You can withdraw the money at any time, or on demand.

7 Borrowing Short-Term Credit cards, personal cash loan Long-Term
Mortgage, auto loan

8 Other Financial Services
Insurance protection Stock – money paid for investment into a business (securities) Bond – A form of a loan or IOU (securities) Mutual Funds – pools money from multiple investors to purchase securities

9 Electronic Banking Services
Direct Deposit – automatic deposit of net pay into an employees designated banking account Automatic Payments – authorization needed, your bank withdrawing money monthly for a payment or bill ATM – computer terminal that allows for the withdrawal of money, deposits, and transfers

10 Document Detectives Textbook Page 193
Answer question #1-6 in your notes

11 Evaluating Financial Services
Balance your short-term needs with your long-term needs Location and convenience Fees Re-evaluate occasionally

12 Types of Financial Institutions
Safety Deposit Institutions Non-Depository Institutions

13 Safety Record, examine history
Federal Deposit Insurance Corporation (FDIC) Protects deposits in banks Insures each account in a federally chartered bank up to $100,000 per account

14 Deposit Institutions Commercial banks – for-profit institution that offers a full range of financial services. Savings and loan associations – traditionally specialized in savings accounts and mortgage loans but now offers many of the same services as commercial banks. Mutual savings banks – owned by depositors, specialize in savings accounts and mortgage loans. Lower interest rates on loans and pay a higher rate on savings accounts. Credit unions – nonprofit, owned by its members and organized for their benefit.

15 Non-Depository Institutions
Life Insurance Companies – provide financial security for dependents. Investment Companies – combine money with funds from other investors in order to purchase securities, mutual funds. Finance Companies – Advice, loans for consumers and small businesses, investing

16 Problematic Financial Businesses
Pawnshops Make loans based on the value of tangible possessions Interest charged Check Cashing Outlets Charge from 1-20% of the face value of a check Payday Loans Write a check to get a ‘loan’ Personal check not cashed for 14 days Interest charged and rolled over, a continuous cycle Rent-to-Own Centers Own an item if consumers complete a certain number of monthly or weekly payments. Interest charged – end up paying more than the item is valued.

17 Section 1: Assessment Textbook page 201 #1-7
Complete on separate sheet of paper and turn in

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