Numbers In the U.S. Over 11,000 banks 2,000 savings and loans associations 12,000 credit unions What do all these institutions do with your money?

Personal Finance Chapter 5 Banking

Objectives Identify available financial services Distinguish between types of financial institutions

What’s Your Financial ID? A bank CD is a Cash Deposit Compact Disc Certificate of Deposit Compact Deposit

What’s Your Financial ID? To borrow money from the bank, you need to ask for a Loan Money Market Account Safe-Deposit Box Transfer

What’s Your Financial ID? You can store valuables in the bank’s vault if you have Permission A Money Market Account Safe-Deposit Box An ATM Card

What’s Your Financial ID? You keep money in a bank account to Keep it safe Earn interest Learn financial responsibility All of the above

What’s Your Financial ID? The total amount of money in your bank account is called The statement The interest The balance Peanuts

What’s Your Financial ID? The amount of money your bank account earns depends on the Type of account you have Balance in your account Interest rate All of the above

What’s Your Financial ID? When you make a purchase and have the funds taken directly from your checking account, you use a Credit card Note from your mother Debit card Driver’s License

What’s Your Financial ID? To set up a savings plan that requires a low minimum balance and allows you to withdraw funds at any time, you would Buy a CD Buy a U.S. Savings Bond Put the money under your mattress Open a Savings Account

Types of Services Savings Borrow: ATM’s Loans CD’s Credit Cards Money Market Accounts Checking Account Borrow: Loans Credit Cards Other: Insurance Stocks/Bonds Mutual Funds Taxes Financial Planning

Electronic Banking Direct Deposit: Automatically put into your account What’s the advantage of Direct Deposit? Automatic Payments: Bank withdraws and pays your bill automatically Advantages/Disadvantages?

More Electronics Automated Teller Machines: Withdraw cash from your accounts You can also transfer and deposit Debit Card: Withdraw money and pay for purchases from savings or checking accounts

Point-of-Sale Transaction The use of a debit card to purchase an item or a service at a retail store, in a restaurant, or elsewhere

Opportunity Costs of Financial Services Is a higher interest rate on a CD worth giving up liquidity? Would you trade the convenience of getting cash from the ATM near your work or school for a lower ATM fee? Is it worth opening a checking account that has no fees, but doesn’t earn interest if you keep a minimum balance

Question What other financial institutions do people use, other than traditional banks?

Deposit-Type Institutions Commercial Bank: For Profit Full range of services Savings & Loans: Traditionally specialized in savings accounts and mortgages.

More Deposit-Type Credit Union: Non-Profit that is owned by its members and organized for their benefit. Members usually have a common bond: job or union

Non deposit-Types Life Insurance Companies: Financial security for your dependents. Investment Planning Investment Companies: Buy stocks, bonds, and other securities. Mortgage Companies: Specialize in loans for homes

Banking Activity In groups of 2 or 3: Discuss 5 specific services that a bank will provide How/Why would you use the services? 3 Column Table: 1. Service, 2. Description, 3. When/Why you would use

Complete Research: Credit Unions Life Insurance Companies Investments Companies Mortgage Companies List services each institution provides and explain why you would choose each institution over a local bank