Building Bucks Basic Financial Services

Financial Institutions 3 Main Types – Banks – Credit Unions – Savings and Loan Associations (S&L) Advantages – Convenient access to your money – Security – Saves money – Access to knowledgeable people – Building block of credit – Earn interest

Types of Saving Regular Savings Account – Interest paid monthly – May require a minimum deposit Certificates of Deposit (CDs) – Money must remain in account for a term – Higher interest rate than a savings account Money Market Account – Limited check writing and withdrawals – Pay higher interest than regular savings accounts – Interest rate may change U.S. Government Securities – Often offers highest return with lowest risk

Choosing a Savings Account How much will my savings earn? How easy is it for me to access my money? What’s the minimum amount needed to open the account? Is there a minimum balance to keep the account open? Does the account have a maturity date? Is the account “liquid” or “long-term”?

Checking Account Basics Advantages Convenient—money available Safer than carrying cash Proof of payment Easier budgeting Disadvantages Cost of over-drafting account can be costly Greater responsibility for record keeping Minimum balance or fee requirements

Choosing a Checking Account What types of checking accounts are available? Is a minimum balance needed on an account and is it able to earn interest? Does the account have ATM or Debit cards available? Are overdraft protection plans available? What are account disclosures?

Maintaining a Checking Account 1.Record all transactions in your register – Checks – Debits – ATMs 2.Keep a running balance of your account 3.Balance your checkbook with your monthly statement 4.Subtract checks and ATM withdrawals from your checkbook right away

Overdrafts “Overdrafting” or “Bouncing a check” – Spending more than you have Overdraft protection – Offered by some financial institutions – Moves money from savings to checking in cases of overspending

Savings and Checking Accounts Opening an account – Identification – Social Security number – Money to put in the account Using an ATM – Deposit money – Withdraw money – Check your balance – Transfer money between accounts

Savings and Checking Accounts Direct Deposit and Electronic Transfer Account – Automatically deposit checks directly into a savings or checking account Pre-Authorized Transactions – Scheduled payments automatically pulled from your account Online banking – Manage all accounts with a secure website

Loans Secured – Some kind of collateral attached to the money being borrowed – Ex: Home mortgage, home equity loans, car loans Unsecured – No collateral attached to the money being borrowed

Types of Loans Personal Loans – Almost always unsecured – Higher interest rates Auto Loans – Often secured with the car being purchased Home Improvement Loans – Typ. repaid on a monthly schedule Education Loans – Very low interest rates Debt Consolidation Loans – Consolidate all debt onto one account