Money & Banking

1. Money & Banking

2. What is money… • Medium of Exchange • It is accepted in buying and selling goods and services. • Easier than barter • Store of value • It can be set aside for the future and still have value • Measure of Value • How much is something worth? Allows for easy comparison. A$500 laptop computer is worth more than a $100 printer

3. Characteristics of Money • Durability – won’t wear out or break • Portability – easy to carry or move • Divisibility – can divide in to practical sizes • Uniform- each unit is exactly the same (is a new pencil the same as a used pencil?) • Limited Supply/Hard to Counterfeit- the law of supply and demand – if anyone can get it, it has no value. • Acceptability- sellers agree to accept it in exchange for their product.

4. How does money get its value? • Commodity – has value in and of itself • Wheat – I can use it to make bread or trade it to someone else who wants to make bread. • Specie – Coins made of silver and gold or IOUs that can be traded for silver and gold • Fiat – legal tender – government orders or decrees that the money has value

5. Your Turn • Evaluate a commodity as a form of money…

6. Where to keep the money safe???Bank vs Credit Union A Bank is a for profit company that makes money from charging fees and lending money to its customers. Banks pay taxes. Advantages - more locations, more financial products. A Credit Union is a non-profit cooperative owned and controlled by its members. It serves groups that have something in common, profession, neighborhood… Advantages – lower fees and better interest rates.

7. How do banks make $$$$ • Fees charged for service • Loans to its customers • House • Mortgage • Home equity • Car/boat • Credit Cards

8. So how about those fees?Choosing an Account • FDIC insured • Minimum balance • Monthly fees • Free ATMS (the account provider's ATMS) • Check Card • Free online banking • Ability to set-up direct deposit • 24/7 customer service

9. Pick your account…. • Review the two documents • Fill in Appendix A • Choose an account and explain why

10. Overdraft protection • $100 balance • Withdrawals of $120, $15, $5, $3 • What would these cost you with overdraft allowed? • What would this cost with overdrafts linked to a savings or credit card?

11. Accessing your money… • Filling in a check… • Keeping your check register… • On-line Bill Pay…

12. Debit v Credit cards • Quick read and questions… • What are the advantages of using cash, credit, check, debit card? • What are the disadvantages of each?

13. Protecting your identity • How do they do it? • How can you protect yourself?

14. Brainstorm • What kinds of loans can you get…

15. Types of loans… • Open – ended loans • Can borrow money over and over (credit card) • Closed-ended loan • Have ending date – 5 year, 15 year… • Mortgages and car loans • Secured loans • Require and asses to be used as collateral – if you default, they take your collateral • Unsecured loans • No collateral is required – generally has a higher interest rate

16. Calculating Interest Calculating on a savings account for each year…(see packet) Buying a car: $15,000 car 6% APR 5 year loan What is the Interest?

17. Who gets the best interest rates? • Your Credit score determines your interest rate…