The Main Idea

We will discuss the banking system and financial institutions and the functions of each

“A Penny Saved is a Penny Earned”

Objectives:

-Explain the purpose of the Federal Reserve System

-List the types of financial institutions

-Discuss factors for selecting a financial institution

Essential Question – What is the purpose of the FED?

The Federal Reserve System

The Fed is the bank for banks

All national banks must join, state banks by choice.Member banks – any bank that is a member of the Fed

Federal Reserve System (Fed)Set up by the gov’t to supervise and regulate member banks and to help banks serve the public efficiently.

The Fed’s districts

The United States is divided into 12 Federal Reserve districts

Each district has a central Federal Reserve Bank

Which Federal Reserve Region serves Lehighton?

Federal Reserve Activities

The Federal Reserve serves member banks (JTNB) in several ways

Reserves – banks can’t lend all of the money they receive from customers

Why is this?

The Fed holds these deposits in case the banks need additional funds to meet the daily customer demand.

Federal Reserve Activities (cont’d)

Clearing – refers to the paying of checks among different banks in different cities

Ex – My friend visits from Colorado and I owe him money

Banking and the Economy

The actions of the banking system affect us in many ways

The following are some of the activities for which banking services are offered:

Build homes

Start new businesses

Plant crops

Finance education

Build hospitals

What is the main purpose of the Federal Reserve System?

To supervise and regulate member banks and to help banks serve the public efficiently

Types of Financial Institutions

Commercial Banks

Savings and Loan Associations

Mutual Savings Banks

Credit Unions

There are many types of financial institutions that provide a wide range of products and services:

In Word, write a two to three page paper, in

MLA format explaining:– When the FED started and why– What the four main financial institutions are and

explain their purpose/what they do. – State similarities/differences – Give local examples of each financial institution

throughout your research paper. – Must have WORKS CITED in proper MLA

format!!!!

Deposit Institutions

Deposit Institutions accept deposits from people and businesses and use them to finance their own business

Commercial bankThe most common way for a bank to be organized; offer a wide range of financial services.

Commercial Banks

Often called full service banks

Offer checking & savings accounts, give loans

Savings and Loan Associations

Traditionally, a S&L specialized in savings accounts and giving loans for home mortgages.

Now, they are more like regular banks.

They will have “Savings Bank” in their names

Mutual Savings Banks

A savings bank that is owned by, and operated for the benefit of its depositors.

Profits are distributed in proportion to the amount of business each participant does with the company

Mainly for savings and home loans

Credit Unions

People in the same company, gov’t agency, labor union, or profession often form credit unions.

Credit unionare user-owned, not for profit, cooperative financial institution.

Non-Deposit Financial Institutions

Life Insurance companies

Investment companies

Consumer Finance Companies

Mortgage companies

Check-Cashing outlets

Pawnshops

Selecting a Financial Institution:Check out the services offered

Savings accounts

Checking/payment accounts

Loans

Other – safe deposit boxes, trusts, and investment advice

Safety

FDIC insures all accounts in the same name at each bank up to an amount of $100,000

Almost 99% of all banks are FDIC members

Federal Deposit Insurance Corporation (FDIC)Protects depositors’ money in case of the failure of a bank or financial institution that it regulates.

Can anyone spot the sign?

17-2. Pg 428. Financial Services and ElectronicBanking.

Objectives:

-Identify the financial services used by consumers

-Explain types of checking accounts

-Describe electronic banking activities

Think-Pair-Share – read about the seven types of financial services and discuss with a partner

Savings Services

Payment Services

Lending Services

Electronic Banking

Storage of Valuables

Investment Advice

Management of Trusts

Types of Financial Services offered by banks:

Savings services

Payment services

Lending services

Electronic banking– Electronic Funds Transfer (EFT)-refers to the use of

computers and other technology for banking activities – Ex – ATMs, debit card purchases, direct deposit,

automatic bill payment

Types of Financial Services offered by banks: (cont’d)

Storage of Valuables– Safe-deposit boxes- well guarded, safe places to keep

valuables

– Rent from the bank by the year, come in various sizes

Investment advice

Management of Trusts– Bank makes investments with the person’s money

because they are unable to do so (too young, too old)

3 main types of Checking accounts:

Regular Checking Accounts– Service charge- a fee a bank charges for

handling a checking account

– Most banks don’t charge unless you keep a certain minimum balance – often $300 or higher

Types of Checking accounts: (cont’d)

Interest-Earning Checking account– Interest is earned on money in your account– May require a higher monthly balance – Usually very very low amount of interest

Special Checking Accounts– If you only write a few checks each month– Banks charge 10-20 cents per check you write

ELECTRONIC BANKING pg 431

Each day, the use of electronic banking grows

You can do your banking from:– An ATM

– Home

– Computer

– Even your cell phone

E-Banking services, Figure 17-2

Automatic Teller Machines (ATM)

Debit cards are different than credit cards.

Someone please explain the difference.

Debit cardOr cash card, is used for ATM transactions.

E-Banking Services: (cont’d)

In a point-of-sale transaction, a merchant accepts a debit card to pay for purchases.

Direct deposit

Automatic Bill Payments– Bank deducts from your account and transfers

them to appropriate companies

ELECTRONIC PAYMENT OPTIONS pg 432

Debit Card Transactions

Online Payments

Stored-Value Cards– Prepaid phone cards, transit fares, highway

tolls

Smart Cards

1. What are the main financial services used by consumers?

Savings servicesPayment servicesLending servicesElectronic bankingStorage of valuablesInvestment adviceManagement of trusts

1. What are the three main types of checking accounts

Regular checking accountsInterest-earning checking accountsSpecial checking accounts

1. How is a debit card different than a credit card?

A debit card you are using your money that you already have in your bank account,With a credit card, you are borrowing money to pay it back later.

17-3. Pg 435. Checks and Payment Methods

Objectives:-Describe three main types of endorsements

-Describe proper check-writing procedures

-Explain the bank reconciliation process

-Identify other payment methods

Chapter 17.3 pg. 435

This section deals with opening a checking and savings account, writing checks and balancing your check book.

Survey Project

Conduct a survey of 20 students to determine what types of financial services they use. Create a table or graph in Microsoft Word/Excel or on poster board to display your results It is your job to come up with a logical manner to display the resultsStudents surveyed can’t be from this classYou will be graded on ease of understanding your results and effort/creativity

Chapter 17.3 pg. 435

Signature card- opening a checking account starts with the SC, used to verify your signature.

Joint account- when two or more people have an account together

Deposit slip- fill one out when you deposit money into an account. Lists all items you are depositing- cash, coins or checks.

Types of Endorsements

There are three different types of endorsements:

1. Blank endorsement

2. Full endorsement

3. Restrictive endorsement

endorsementWritten evidence that you received payment or that you transferred your right of payment to someone else.

Three types of Endorsements1. Blank endorsement – the person who the check as written to has to sign the back…soon as it is signed it is considered cash!!! Don’t lose it!!!2. Full endorsement aka special endorsement– allows the person who the check was written to transfer it to another person…write “Pay to the order of…”3. Restrictive endorsement – limits the use of the check to the purpose given in the endorsement…write “For deposit only”

Elements of a check

Drawer- owner of the account who signs the check

Payee- person to whom the check is written to

Drawee- bank that pays the check

Elements of a check

The Check Register

If you are writing

checks all the time,

you are going to

forget who you wrote

them to and for how

much

Check registerA section of a checkbook that you keep record of your account activities.

Practice writing a check…

Stop payment order

Can you think of any

examples of when

you would use a “stop

payment order”?

Stop payment orderA written notice that tells the bank not to pay a certain check

Bank statements

Balance begin. of month

Deposits made

Checks paid

ATM transactions

Any EFTs made

Service charges

Any interest earned

Balance at end of mo.

Bank statementThe bank will send you a report on the status of your account

Find Differences

The bank has a statement,

and so do you, your check

register.

Reconciling the bank

statement is when you

are checking to make

sure both are in

agreeance.

Bank reconciliation The document created to show how the two balances were brought into agreement

How much money does Alicia have in her account when the bank statement was printed?

Find Differences

Outstanding Checks

Outstanding checksChecks that have not been cleared (been paid). These checks haven’t been deducted from the bank statement balance yet.

Other types of Payments- sometimes, personal checks aren’t accepted.

Certified Check – personal check for which a bank has guaranteed payment - stamp the face of the check.

Cashier’s Checks - bank uses its own funds for you to write a check with, charges a fee ($3-$10)

Traveler’s Checks – bank writes you a check in your name. You sign it at the bank, and then have to sign it when you want to cash the check somewhere.

Money Orders - a form of payment that orders the issuing agency to pay the amount printed on the check to another party