Download Banking

Chapter 14
BANKING
Banking
 Do Now
 What do you think banks will be like in 15
years?
How to Manage Your Cash
Banking: Types of Financial
Services
…Financial Services
 Savings
 Storage of funds
 Time deposit
 Choosing the right Savings Plan
 Interest rates
 Liquidity
 Safety
 convenience
…Financial Services
 Payment Services
 Checking Accounts
 Demand deposit
 $$$ you put into a checking account
 Borrowing
 Credit cards
 Personal loans
 Other Services
 Insurance protection, stock, bond, etc…
Electronic Banking Services
 Automatic Payments
 Funds automatically drawn from account
 Check bank statements
 Ensure you have enough $$ in accounts
 Direct Deposit
 Automatic deposit of net pay from employer
 ATM’S





(AUTOMATED TELLER MACHINES)
Withdraw $$
Deposit $$
Transfer $$
Debit Card- cash card
Fees- avoid fees when possible
 E-Payments/Online Payments
Evaluating Financial Services
 What are some of the opportunity costs
to consider when selecting financial
services?
Types of Financial Services
 Depository Institutions
 Commercial Banks
 For profit
 Checking, savings, and lending
 Savings and Loan Associations
 Specialize in savings, mortgages
 Non-Depository
 Finance Companies
 Help those with low credit score
 Investment Companies
 Life Insurance Companies
Problematic Financial Businesses
 Pawnshops
 Quick cash loans
 High fees
 Check Cashing Outlets
 Fee: 1-20% of face value of checks
Choosing a Financial Institution
Do Now
 What is the difference between a time
deposit and a demand deposit?
 Jamie applied for direct deposit of her
paycheck. What will she receive on
payday?
Types of Savings Plans
 Regular Savings Account
 Passbook Accounts
 Benefit- low minimum balance, insured, easy
withdrawal
 Drawback- low rate of return
…types of savings plans
 Certificate of Deposits




timed deposits
Time- “Term”
Date $$ is available- “Maturity Date”
Benefits low risk
 insured
 Drawback penalty for early withdrawal
 minimum deposit
…Types of Savings Plans
 Money Market Accounts
 Interest varies month to month
 Benefit Better rate than traditional savings
 Insured
 Drawback
 Minimum balance ($1,000.00)
 Penalty if below minimum balance
…Types of Savings Plans
 U.S. Savings Bonds
 Benefit
 Low minimum deposit
 Guaranteed by govt.
 No state and local taxes
 Drawbacks
 Lower rate of return when cashed before
maturity date
 Long time to mature
Do Now
 Read pages 434-437
 Explain the 5 factors to consider when
evaluating a savings plan
Evaluating Savings Plan
 Rate of Return
 % of increase in the
value of your savings
from earned interest
 Calculation- divide
interest earned by
principal
 Compounding
 Inflation
 Rate of interest vs.
rate of inflation
 Taxes
 Liquidity
 Safety
 Restrictions & Fees
Types of Checking Accounts
Using a Checking Account
 Writing Checks
 Check Register
 Record of your activity in your CHECKING
ACCOUNT
 Checks, deposits, ATM withdrawals, debit card
charges, fees, etc…
 Checks- Date, check #, exact amount, and name
of party who receives check
 Maintain current balance
…Writing Checks
Making Deposits
 Complete deposit slip
Keeping Track of a Checking
Account
 Monthly bank
statement
 Reconciliation (p.
443)
 Deposits
 Report
 Checks you wrote
 Differences between
 ATM withdrawls
 Debit card charges
 Interest earned and
fees
bank statement and
checkbook
 “Balancing
checkbook”