1. Personal Financial Management
Chapter 7: Banking
Personal Financial Management

2. FINANCIAL SERVICES AND INSTITUTIONS
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