Checking Accounts Savings Accounts and Banking Services

1. 9 &10 Checking AccountsSavings Accounts and Banking Services 9.1 Checking Accounts 9.2 Banking Services and Fees 10.1 Growing Money: Why, Where, and How 10.2 Savings Options, Features, and Plans

2. Checking Account Basics • Checks follow a process through the banking system. • The payee cashes your check. • The bank that cashed the check returns it to your bank. • Your bank withdraws the money from your account and sends it to the other bank. • Your bank then stamps the back of your check, indicating that it has cleared. Chapter 9

3. (continued) Checking Account Basics • You must also maintain enough money in your account to cover all the checks you write. • A check written for more money than your account contains is called an overdraft. • A bank that does not honor a check usually stamps the check with the words “not sufficient funds” (NSF) and returns the check to the payee’s bank. • When this occurs, the check has bounced. • Your bank can charge you a fee for each NSF check processed. Chapter 9

4. (continued) Checking Account Basics • Floating a check is writing a check and hoping to deposit money to cover it before the check clears. • Floating a check is very risky because today’s electronic systems allow checks to process very quickly and is illegal in most states. Chapter 9

5. Types of Checking Accounts • Joint accounts • Special accounts • Standard accounts • Interest-bearing accounts • Share accounts Chapter 9

6. Opening a Checking Account • Signature authorization form • Initial deposit Chapter 9

7. Using Your Checking Account • Writing checks • Paying bills online • Making deposits • Using a checkbook register • A checkbook register is a booklet used to record checking account transactions. Chapter 9

8. Making a Deposit teens – lesson 6 - slide 6-D

9. 1 2 3 4 5 9 8 7 6 10 11 Check Details Click the numbers This is just your check number again (see above right). Enter the date you write each check. Put your personal signature here. Here is the number of this Check. Here is where you write the name of the party you are writing your check to (the payee). Be sure to write or print legibly! On the lower line, write out the amount like this. Legibly print the amount of money this check is for. Place to add any information you want to related to this check. Make sure your personal information on the check is correct. This is your Account Number. (Note that sometimes these two numbers are the reverse of what is shown here.) This is the Routing Number for your bank (used for electronic transfers of funds from your account to the payee’s account)

10. DO NOT WRITE BELOW THIS LINE ENDORSE HERE: Endorsed check

11. Bank Reconciliation • The process of matching your checkbook register with the bank statement is known as bank reconciliation. Chapter 9

12. Endorsing Checks • A check generally cannot be cashed until it is endorsed. • To endorse a check, the payee signs the top part of the back of the check in ink. • There are three major types of endorsements. • Blank endorsement • Special endorsement • Restrictive endorsement Chapter 9

13. Blank Endorsement • A blank endorsement is the signature of the payee written exactly as his or her name appears on the front of the check. Chapter 9

14. Special Endorsement • A special endorsement, or an endorsement in full, is an endorsement that transfers the right to cash the check to someone else. Chapter 9

15. Restrictive Endorsement • A restrictive endorsement restricts or limits the use of a check. Chapter 9

16. Let’s Practice Chapter 10

17. Why You Should Save • The best reason to save money is to provide for future needs, both expected and unexpected. • Saving regularly will help you meet your short-term and long-term needs. Chapter 10

18. Short-term Needs • Short-term needs are expenses beyond your regular monthly items. • Usually you will have to pay for these things out of savings. • Examples of short-term needs include the following: • Emergencies • Vacations • Social events • Repairs • Major purchases Chapter 10

19. Long-term Needs • Long-term needs are expenses that are costly and require years of planning and saving. • Examples: • Home ownership • Education • Retirement • Investing Chapter 10

20. Financial Security • Peace of mind comes from knowing that when needs arise, you will have adequate money to pay for them. • The amount of money you save depends on: • The amount of your discretionary or disposable income • The importance you attach to savings • Your anticipated needs and wants • Your willpower Chapter 10

21. How Money Grows • The amount of money you deposit into a savings account is called the principal. • For the use of your money, the financial institution pays you money called interest. • Interest represents earnings on principal. • As principal and interest grow, more interest accumulates. • This is known as compound interest, or interest paid on the original principal plus accumulated interest. Chapter 10

22. Annual Percentage Yield (APY) • Annual percentage yield (APY) is the actual interest rate an account pays, stated on a yearly basis with the compounding included. Chapter 10

23. Compounding Interest Annually • The Year 1 ending balance is the Year 2 beginning balance. • The Year 2 ending balance is the Year 3 beginning balance. • The 6% interest rate stays the same, but the interest earned increases each year. Chapter 10

24. $105.00 + $100.00 = $205.00 $205.00 × 0.05 = $10.25 $205.00 + 10.25 = $215.25 Compounding with Additional Deposits Chapter 10

25. Where to put your money so it can grow?? Chapter 10

26. Regular Saving Account Basics • A savings account(at a bank) or share account(at a credit union) is a place to deposit money you don’t plan to spend right away. • You can add or take out money at any time, without penalty. • A savings account a good place for short- to medium-term financial goals. • Many banks and credit unions make saving easy by allowing you to set up an automatic savings plan, where money is transferred automatically from your checking to your savings account every month. Chapter 9

27. Regular Saving Account Basics • The savings institution is allowed to use your money to invest and earn a profit. • You are paid a small amount of interest for depositing your money. • Your money is insured against loss. Deposits in banks, no matter what type, are almost always safer than other investments because of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA). Chapter 9

28. 6 7 5 4 3 2 1 Savings Deposit x Today’s date goes here 1 2 5 0 9 3 7 5 2 5 Print Your Name Here Print Your Address Here 4 5 0 0 3 Sign Your Name Here 7 5 0 0 3 3 3 3 3 3 4 3 2 5 3 4 Click the numbers

29. Checking Account Advantages • Convenience • Safety • Built-in record keeping system • Access to bank services Chapter 9

30. Regular Savings Account Advantages • A savings account has a major advantage—high liquidity. • Liquidity is a measure of how quickly you can get your cash without loss of value. • Convenience • Safety • Built-in record keeping system • Access to bank services Chapter 10

31. Liquidity • Liquidity is how quickly you can turn savings into cash when you want it. • The need for liquidity will vary, based on your age, health, family situation, and overall wealth. Chapter 10

32. Safety • Safety of principal means that you are guaranteed not to lose your savings deposit, even if the bank or other financial institution fails and goes out of business. • (FDIC) • (NCUA). Chapter 10

33. Convenience • Locations • Services offered Chapter 10

34. Interest-Earning Potential (Yield) • You want to earn as much interest as you can on your deposit, while maintaining the degree of liquidity, safety, and convenience you want. • Shop around for the best Annual percentage yield (APY) in your area for the type of account you want. Chapter 10

35. Selecting a Savings Plan • Liquidity • Safety • Convenience • Interest-earning potential (yield) • Fees and restrictions Generally are advantages if you do your homework Chapter 10

36. Additional Savings Options Chapter 10

37. Certificate of Deposit • A certificate of deposit (CD), or time deposit, is a deposit that earns a fixed interest rate for a specified length of time. • A CD requires a minimum deposit. • You must leave the money in the CD for the full time period. • If you take out any part of your money early, you will pay an early withdrawal penalty. • A CD has a set maturity date, which is the date on which an investment becomes due for payment. Chapter 10

38. Early CD Withdrawal Penalizes Principal Chapter 9

39. Money Market Account • A money market account is a type of savings account that offers a more competitive interest rate than a regular savings account. • There are two different kinds of money market accounts: • Money market deposit account • Money market fund • On average, money market funds will pay a higher interest rate than money market deposit accounts. Chapter 10

40. All banks and Credit Unions Offer Checking Accounts Savings Accounts Money market Accounts Certificate of Deposits Chapter 9

41. Where to Save • Commercial banks • Savings banks • Savings and loan associations • Credit unions • Brokerage firms • Online accounts Chapter 10

42. Banks Credit Unions For-profit companies owned by shareholders Not-for-profit institutions owned and controlled by their own customers, who are known as members Managed by a paid board of directors elected by the bank’s shareholders Managed by a member and volunteer board of directors, who are elected by other members Offer their services to everyone; anyone can become a customer Offer their services to special groups of people and may be employer-, church-, community-, or alumni-sponsored (among others); customers must qualify for credit union membership through their membership with these special groups of people Credit Unions and Banks 1 2 3

43. Credit Unions and Banks Banks Credit Unions Owned by shareholders; customers do not have ownership or voting privileges unless they also own stock in the bank Owned by each credit union member, who has equal ownership and one vote, regardless of how much money a member has on deposit Profits benefit a small group of stockholders Profits are returned to members in the form of lower fees and loan rates and higher interest on deposits Accounts are federally insured up to $100,000 by the Federal Deposit Insurance Corp (FDIC) Accounts are federally insured up to $100,000 by the National Credit Union Administration (NCUA) 1 2 3

44. (continued) Online & Telephone Banking • Most banks also allow and encourage electronic transfers of money. • An electronic funds transfer (EFT) uses a computer-based system that enables you to move money from one account to another without writing a check or exchanging cash. Chapter 9

45. Chapter 9

46. Direct Deposit • With direct deposit, your net pay is deposited electronically into your bank account. • You receive a nonnegotiable copy of your check and stub, notifying you of the amount deposited directly into your account • You can have your automatic deposit split between accounts, with some going into savings and some going into checking to cover your bills. Chapter 10

47. Automatic Deductions • Automatic deductions represent money you have authorized your bank or other organization to move from one account to another at regular intervals. • With a payroll savings plan, you authorize your employer to make automatic deductions from your paycheck each pay period. Chapter 10

48. Debit Cards • A debit card is a card that deducts money from a checking account almost immediately to pay for purchases. • When a debit card is used, the amount of the purchase is quickly deducted from the customer’s checking account and paid to the merchant. Chapter 9

49. How to Use a Debit Card • Swipe the debit card in the card reader • Choose the “Debit” option. • Enter your PIN number* • Enter the amount of cash back, if desired. • Money is taken directly out of your checking account, so enter the amount spent into your checking ledgerand/or keep track of it through your online banking account.

50. About Your PIN • PIN stands for personal identification number. This number gives you access to your account, so keeping it secret is important. • Memorize your PIN number. Do not write it down and keep it somewhere in your wallet (where someone could find and use it).