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Where should i put my money?An introduction to banking.
Checking?
Savings?
Under the mattress?
Banking vocabulary balance - the current amount in your account ($$$) bounce: a check is written for more money than is in the account check - a piece of paper (usually) that orders payment of money check register - where you record all account transactions checking account - a place where you can deposit and withdraw
money credit - money that goes into your account debit - money that comes out of your account deposit - money put into your account depository institution – financial institution that accepts deposits
from consumers endorse - sign your name on the back of a check
Source: PDESAS.org, Wikipedia
Banking Vocabulary memo line - record what the check was written for mutual fund - investment portfolio shared with othersoutstanding - transaction not appearing on your bank statement overdraft - when you write a check with too little money in the
bank reconcile - you and the bank agree on how much money is in
your account routing number - identifies the bank where you have your
account signature card - form you need to fill out at the bank to open an
accountwithdrawal - money taken out of your account
Sources: PDESAS.org, Wikipedia
Depository Institution0Accepts money in the form of deposits from consumers.0Uses that money to generate profits through loans and
investments0 Includes:
0 Savings banks0 Savings and loan associations0 Commercial banks0 Credit unions
0Differences:0 Purposes0 Customers and products0 Regulation0 For-profit or non-profit
Note: Check cashing businesses are financial institutions but are not depository institutions.
More at: check cashing.com
Savings Banks
0Main purpose: accepts deposits for savings0Also called retail banks0Deals primarily with consumer accounts as opposed to
business accounts0Deposit account earnings are applied to individual accounts
as interest payments0Have the letters SSB or FSB after the name to indicate
whether they are a state savings bank or a federal savings bank.
Savings and Loan Associations
0Main purpose: mortgages and other consumer loans0By law, must have at least 70 % their assets in
residential mortgages or mortgage-backed securities (assets backed by residential mortgages).
0Primarily regulated by the Office of Thrift Supervision and the state where it resides
Sources: theNest.com, Wikipedia
Commercial Banks0Main purpose: provides financial services to
businesses0Also called national banks0Greater emphasis on business customers0Generally deal with larger amounts of money0Regulated federally by the Office of the Comptroller of
the Currency (Treasury Department).0Services:0accepting deposits, 0giving business loans 0basic investment products.
Credit Unions0Main purpose: consumer deposit and loan services0Non-profit0Financial cooperatives – owned by members of some
group0Deposits = purchases of shares (partial ownership in
the business)0Credit Union earnings returned to members in the
form of dividends 0Lower interest rates on loans and higher rates on
savings because they are non-profit
Source: wdfi.org
Federal Deposit Insurance Corporation (FDIC)
What is the FDIC?0An independent agency of the U.S. government that protects you
against the loss of your deposits if an FDIC-insured bank or savings association fails.
0FDIC insurance is backed by the full faith and credit of the U.S. government.
0Since the FDIC's creation in 1933, no depositor has ever lost even one penny of FDIC-insured deposits.
0 Insures deposits up to $250,000
More information at FDIC.gov
Money Talks
Let’s go back to the “Money Talks” Newsletter
Review Questions
Answer these questions using your own words. Write your responses in your notebook. We will go over the answers before you leave if there is time.
Question #1 What is a “depository institution”?
Question #2
How do banks make money?
Question #3
What is a key difference between a Credit Union and other depository institutions?
Question #4
What is the main purpose of a Savings and Loan?
Question #5
Which type of depository institution would the Casino Theater go to if they wanted to open a second restaurant/theater in another location?
Question #6
How much does the FDIC insure deposits for?
End of lesson
The rest is for another day
Types of Deposit Accounts: Regular Accounts
0Single – one account holder0 Joint – more than one account holder0Checking accounts0Personal0 Student / youth account 0Business
0Passbook savings 0Statement savings0Christmas / Vacation Clubs
More information at moneymatters
Types of Accounts: CD’sCertificates of Deposit (CDs)
0 Deposit a specific dollar amount for a specific period of time
0 Low risk investment0 Fixed interest rate0 Fees for early withdrawal (usually)0 More information at FDIC.gov0 How to calculate CD earnings (this is a bit advanced but
some of you might be interested)
Rate samples at PNC BankWhich account is right for you questionnaire
Money Market
0A type of checking account that pays a higher interest rate in exchange for limited access to the account. For example, you may only be able to write 4 checks per month
More info and video at Investopedia.
Mutual Funds
0 These funds allow you to pool your money with other investors in order to maximize return (the money your earn on your investment) and minimize risk through diversification (spreading your money over a large number of investments).
0 Every fund has a portfolio manager who buys and sell investments in order to make a profit for the mutual fund members.
0 Mutual fund portfolios often include a variety of stocks and bonds.
More information at CNN Money 101and Wikipedia
Types of Accounts: Accounts with Tax Savings
0College savings plan (529)0 Individual Retirement Account (IRA)
0 Generally long term investments but there are many types of accounts that can be opened as IRA’s
0 Tax incentives0 Roth IRA – after tax money0 Traditional IRA – before tax
money0 More information at
The Motley Fool0401(k) and 403(b) accounts
have money take directly from your paycheck
Types of Loans
0Personal loans0Car loans0Student loans at CollegeBoard.org
0Mortgages0 Primary mortgage (first loan on a house)0 Second mortgage (additional loan on a house)0 Home equity line of credit (based on equity in house)0 Refinance (pay off mortgage and redo to save money or
pay for something expensive)0Business loans
Other Bank Services
0Debit cards0Credit cards0Telephone bill pay0Online banking0Online statements0 Investment advice
Today’s AssignmentRead through the Money Matters newsletter. ThenComplete the puzzle on the handout.
