1. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON1 Chapter 19 Managing Money Section 1:Money and Credit Section 2:Banks and Banking Section 3:Saving and Investing Section 4:Insurance Against Hardship

2. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON2 Chapter 19 OBJECTIVES  What are the four basic characteristics of currency?  Why do people and businesses accept checks as payment instead of cash?  How is credit important in families and in the economy as a whole? Section 1:Money and Credit

3. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON3 Chapter 19 Four basic characteristics of currency:  Must be easy to carry and take up little space  Based on system of units easy to multiply and divide  Must be durable  Must be in a standard form and guaranteed by the government Section 1:Money and Credit

4. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON4 Chapter 19 Why do people and businesses accept checks?  Much of the U.S. money supply is in the form of bank deposits.  A check is a promise of funds sufficient to cover stated amount.  Insufficient funds and overdrafts are punished with fines or criminal penalties. Section 1:Money and Credit

5. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON5 Chapter 19 The Importance of Credit  Credit allows wholesalers to buy a larger quantity of goods at once.  Families use credit for emergency purchases and large purchases.  Credit enables consumers to buy when production is high and goods are being sold.  Consumer spending encourages economic growth. Section 1:Money and Credit

6. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON6 Chapter 19 OBJECTIVES  What is the FDIC, and how does it help depositors?  What caused the savings and loan crisis in the 1980s?  How and why does the Federal Reserve System regulate the amount of money in circulation? Section 2:Banks and Banking

7. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON7 Chapter 19 The FDIC:  FDIC—Federal Deposit Insurance Corporation  A government agency  Insures accounts in commercial and savings banks for up to $100,000 Section 2:Banks and Banking

8. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON8 Chapter 19 The savings and loan crisis:  1980s—many of the banks involved in risky loans, bad investments, and fraud  Hundreds of the banks failed  The FSLIC ran out of money, and debt was passed on to the FDIC.  The Resolution Trusts Corporation was established to sort out the crisis.  1999—cost to taxpayers estimated at $165 billion Section 2:Banks and Banking

9. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON9 Chapter 19 The Federal Reserve System regulates the money in circulation:  Regulation prevents bank failure.  The Fed controls money circulation to keep the economy healthy.  The Fed buys government bonds from banks and individuals to increase circulation and speed economic growth.  The Fed sells government bonds to take money out of circulation when economy grows too fast.  Member banks can borrow money from the Fed to increase their reserves. Section 2:Banks and Banking

10. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON10 Chapter 19 OBJECTIVES  Why is it important to save money?  What are some ways people save and invest their money?  How does saving money help the U.S. economy? Section 3:Saving and Investing

11. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON11 Chapter 19 The importance of saving money:  People save for education, emergencies, retirement, and large purchases.  Credit purchases often require a down payment in cash.  Ability to make a large down payment reduces monthly payments and the total interest on a loan. Section 3:Saving and Investing

12. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON12 Chapter 19 Ways of saving and investing:  Purchasing items that may increase in value  Regular installments to a savings account that is earning interest  Certificates of deposit (CDs)—interest is paid when CD matures  Stocks—common and preferred stock; mutual funds; money market funds  Bonds—low risk; money and earned interest is returned when bond matures Section 3:Saving and Investing

13. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON13 Chapter 19 Saving money helps the U.S. economy:  Expansion of the economy requires capital; money in savings is used for expansion.  Money saved is also money invested in the economy.  Companies’ ability to raise capital promotes the country’s prosperity.  Banks use money in savings to make loans to businesspeople.  Businesses that save are able to reinvest in themselves. Section 3:Saving and Investing

14. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON14 Chapter 19 OBJECTIVES  How are insurance companies able to cover the hardship costs of so many people?  What is the difference between private insurance and social insurance?  Why was Social Security created, and why are some people concerned about its future? Section 4:Insurance Against Hardship

15. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON15 Chapter 19 Insurance companies cover many people:  Premiums are collected from millions of policyholders.  Money is held in a reserve fund.  Laws specify how much must be held in the fund.  Claims are paid from the fund.  Relatively few policyholders make claims each year.  Other moneys are invested and profits are used to run the company. Section 4:Insurance Against Hardship

16. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON16 Chapter 19 Private Insurance and Social Insurance  Private insurance—voluntary insurance paid by individuals and companies: life insurance, health insurance, property and liability insurance  Social insurance—government programs meant to protect individuals from future hardships: Social Security  Social Security includes old age, survivors, and disability insurance, unemployment compensation and workers’ compensation Section 4:Insurance Against Hardship

17. A merican C ivicsHOLT HOLT, RINEHART AND WINSTON17 Chapter 19 Social Security and Its Future  Social Security Act of 1935—part of the New Deal; intended to protect citizens from future hardships  Retirement population is growing while birthrate is dropping.  Fewer workers will be supporting growing group of retirees.  Critics argue the tax will continue to rise and prefer to abolish the program. Section 4:Insurance Against Hardship