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 SavingsPayment ServicesBorrowingOther 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 CDsSelection 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 accountYou 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 protectionStock – 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 accountAutomatic Payments – authorization needed, your bank withdrawing money monthly for a payment or billATM – 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 needsLocation and convenienceFeesRe-evaluate occasionally
12 Types of Financial Institutions SafetyDeposit InstitutionsNon-Depository Institutions
13 Safety Record, examine history Federal Deposit Insurance Corporation (FDIC)Protects deposits in banksInsures each account in a federally chartered bank up to $100,000 per account
14 Deposit InstitutionsCommercial 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 PawnshopsMake loans based on the value of tangible possessionsInterest chargedCheck Cashing OutletsCharge from 1-20% of the face value of a checkPayday LoansWrite a check to get a ‘loan’Personal check not cashed for 14 daysInterest charged and rolled over, a continuous cycleRent-to-Own CentersOwn 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