1. Journal 49
Do you think you are more likely to use a bank or a credit union or both in your future? Why? What is a pro and con of your choice?

2. Financial Institutions

8. Banks have “customers”, CU’s have MEMBERS
3 Basic Types
Banks
Offer the widest variety of services
Checking, Savings, Loans (many types), Credit Cards, Business Loans, Transfers, etc
Owned by a private company
Credit Union
Owned by people who hold accounts there (the MEMBERS)
Usually must be a member of another organization 1st (FCBOE, Delta, Firemen’s, Police)
Typically more “personal” and more willing to make emergency or cheaper loans
Banks have “customers”, CU’s have MEMBERS

9. 3 Basic Types (Continued)
Savings and Loans
Companies that take on savings accounts JUST to make certain kinds of loans
More rare now than in the 1980s
Other types of institutions
Online banks (Paypal, ING)
Payday loan facilities
Online transfer

10. How do banks make money? 2% - .75 = 1.25% profit
Difference between INTEREST PAID vs. INTEREST EARNED
EXAMPLE:
Southern Federal Credit Union is currently paying about .75% annual interest on savings accounts
When they make a loan they charge 2%
2% = 1.25% profit

11. How do banks make money?
Other money makers include overdraft fees, annual or monthly fees, and products like checks
Annual percentage Rate (APR) – the yearly cost of a loan

13. Speaking of interest… Simple vs. Compound Interest
Simple interest: Interest paid on the principal only
You deposit $100 at 10% interest per year.
You will get $10 added to your account every year.
Compound interest: Interest paid on the principal AND accumulated interest

14. Example
Jack and Sarah both open savings accounts with a starting balance of $ on the same day.
Jack's bank is paying him compound interest, Sarah's bank is paying simple interest.
Both Jack and Sarah are receiving 8% annually.

16. 3 Major Investments STOCKS MUTUAL FUNDS BONDS
Pros: high return, easy to purchase
Cons: HIGH RISK, requires research
MUTUAL FUNDS
Pooling money into a fund with others and having someone else invest for you
Pros: Decent return, safer investment, requires less research
Cons: Less return than stocks, less flexibility
BONDS
Loaning money to government or corporation
Pros: Safe investment, specific terms
Cons: Low rates of return

17. Risk/Return Spectrum BONDS STOCKS MUTUAL FUNDS SAVINGS ACCOUNT
High Risk
High Return
Low Risk
Low Return
BONDS
STOCKS
MUTUAL FUNDS
SAVINGS ACCOUNT
Antiques /Collectibles
Commodities (Gold, Silver)
Real Estate