11/10/2009

 Roaring 20’s  1920’s turmoil  Banks were risky and reckless with their practices frequently accepting high-risk loans.  1 - Businesses collapse 2 - farmers have crop failures 3 - the stock market crash.  When the Stock Market Crashed panic spread Bankers rushed to withdraw their money, this with the non-returned loans resulted in thousands of bank failures across the country.

 FDR became president in  In 1933, Congress passed the act that created the Federal Deposit Insurance Corporation (FDIC)  The FDIC insures customer deposits if a bank fails - $250,000

 Savings accounts – pay a small amount of interest – usually less then 1% annually  Checking Accounts – place to save your money without any interest, easy to take out money with checks/cards  Money Market Accounts – Usually have a minimum balance but have a higher interest rate then savings accounts  Certificates of Deposit (CD’s) – offer a guaranteed rate of interest over a certain period of time, they cannot be removed until that time is up or a fee must be paid.

 Banks often provide loans.  Loans allow for banks to make money.  They earn money by charging interest on loans. Principal – the amount of money that is borrowed Interest is the price paid for the use of a loan  Get a loan for  House  Car  School  Boat  Business

 There are two types of interest, each has its advantages  Simple Interest – interest paid only on your initial deposit  If I deposit $100 in a savings account at 5% simple interest, I will make $5 in annual interest forever  Compound Interest – Interest paid on both principal and accumulated interest  In the example above, in the second year I will be paid interest on $105

 Debit  ATM  Direct Deposit  Automatic Withdraw  Safety Deposit Box