Banking Unit

1. Banking Unit

2. TEKS • Evaluate the forms of financial exchange including cash, credit, debit, and electronic funds transfer • Identify types of currency, including paper money, coins, bank notes, government bonds, and treasury notes • List the function of money as a medium of exchange, unit of measure, and store of vlaue

3. TEKS cont. • Simulate opening and maintaining various types of bank accounts • Reconcile bank statements Compare the advantages and disadvantages of different types of banking services Examine investment growth by developing a personal investment plan

4. A Bank is a business • People who want to start a bank must apply for a charter from the state • If the charter is from the federal government , the bank will operate as a national bank • Banks are heavily regulated. Many people’s money is at stake!

5. Types of Banks • Commercial—full-service banks that offer checking, savings, loans, and other services • Credit unions-user-owned, not-for-profit cooperative financial institutions. Formed by people in the same company, union, etc. • They offer checking, savings, debit & credit cards, loans, electronic banking services, etc There is the teacher’s federal credit union, police officer’s credit union, etc.

6. Most common bank services • Accept deposits • Transfer funds • Lend money • Store valuables • Provide financial advice • Manage trusts • Distribute debit and credit cards

7. What are debit cards & why are they so popular? • Debit cards are used most frequently instead of paying with a check. • The money automatically comes out of your checking account and is transferred to the store’s checking account in one single transaction. • The debit transaction will appear on your online bank statement within 24 hours • Restrictions—some banks will not let you go over $400 on your debit card in any one transaction.

8. What is a credit card? • A credit card allows you to charge for items and pay off the cost of the item over a period of time. • In return for the bank allowing you to charge the item, you will make payments back to the financial institution that also include a monthly finance charge. The charge is based on how much you owe. • The more you owe, the higher the finance charge. You should avoid purchasing things you know you cannot afford.

9. Advantages of a checking account • Convenience – you can write checks to pay your bills • Safety- money is in the bank—do not have to worry about fire, theft, or carelessness. Can send a check through the mail. • Money is protected (insured) by FDIC • Cancelled check is proof of payment • Bank statement is a record of financial deposits and payments.

10. Opening a Checking Account • Must fill out a signature card • Make the first deposit (fill out a deposit slip) • Decide what type of account you want: • Regular checking (service charge) • Interest bearing earn interest if specific balance is maintained at all times (example: $3,000 +) • Money market (few withdrawals, must maintain a high balance, interest bearing) • Student account (parents must maintain a specific balance in their accounts)

11. Endorsing Checks • 3 ways: • Blank—Just sign your name on the back • Restrictive—For deposit only and your name (safest) • Special or Full—Pay to the order of another person and sign your name (only the other person can cash the check)

12. Maintaining a checkbook • You should record all deposits and all checks in your check register or on a check stub. • You should at all times keep records of your account and reconcile your balance every month when you get your statement. • People make mistakes!

13. Parts of a check • Be able to identify: • Payee • Drawer • Drawee • Date • ABA number • Federal reserve # • Amount in figures • Legal Amount • Bank Routing number • Checking Account number • Check number

14. Tips for Writing Good Checks • Always use ink • Write clearly • Write No/100---- for even amounts • Raise cents 58/xx and 58/100---- • Void checks when you make an error • Only write checks if you have the money in your account • Record all checks written

15. Other Types of Checks • Certified- Personal check for which a bank has given payment. • Cashier’s –A check where you give the teller cash plus a service charge and she prints a check which guarantees the money has been paid (much like a money order) • Traveler’s Check-Checks that you carry that you have paid cash for. Must sign at the bank and then at purchase (very safe). Keeps you from carrying cash with you on vacation. • Money Order -You purchase these with cash and these can be put in the mail, etc. Payment is guaranteed.

16. More sources of money • Wiring money –can be sent quickly in an emergency • Electronic funds transfer—money can be transferred from one account to another as at an ATM machine • Direct Deposit—you can have your paycheck automatically deposited in your account.

17. Processing checks • Checks may be cleared within one bank, through a clearinghouse, or through the Federal Reserve System. • See page 384 for the cycle a check may follow…

18. Your Bank Statement • Contains all service charges • Contains a list of cancelled checks (checks that have cleared the bank) • Contains a list of cancelled deposits (deposits that have cleared the bank)

19. Your Checkbook • Contains a list of checks that you wrote • Contains a list of deposits that you made • You must reconcile or bring your checkbook in balance with the bank statement: • Subtract service fees from your checkbook side • Add outstanding deposits & checks to the bank’s side

20. Money Guaranteed • The FDIC (Federal Deposit Insurance Corporation) guarantees your money in the bank up to $250,000 per account. • This was passed in July 2010 from $100,000 to $250,000

21. Other places to invest your money • Life Insurance Companies – pay an amount per month every month--cash is received as a death benefit to your family if something happens to you, can earn dividends/cash value if whole life insurance • Investment Companies- setaside a specific amount each month—money is invested based on percentage of risks in stocks, bonds, treasury bills (mutual funds, 401Ks, 403B’s are what these are called at work) • Finance Companies—loansfor emergencies; usually quite costly

22. Currency • 100’s– Benjamin Franklin • 50’s –Ulysses S. Grant • 20’s –Andrew Jackson • 10’s –Alexander Hamilton • 5’s --Abraham Lincoln • 1’s –George Washington • The federal reserve has taken precautionary measures to see that bills are not counterfeited. How do you know a bill is counterfeit?

23. Coins • One dollar—Sacagawea • 50 cent piece- John F. Kennedy • Quarter-George Washington • Dime-Franklin Roosevelt • Nickel – Thomas Jefferson • Penny- Abraham Lincoln

24. Selecting where to put your money • Look at Services offered • Safety • Convenience • Growth in funds • Fees & Charges • Restrictions

25. How to Become a Millionaire • Make a personal plan • Put aside at least $200 a month starting at age 25 • Consistently invest this money each month in growth options • Never stop the plan and increase it to $300 in your 3o’s and $400+ in your 40’s • You will have over a million dollars before you are 65 years old.