WHAT IS A FINANCIAL INSTITUTION An organization that

WHAT IS A FINANCIAL INSTITUTION? An organization that provides services that everyone needs to manage money Banks, credit unions and thrifts are government regulated and FDIC insured Investment and Insurance companies offer financial services but are non-banking institutions Other non-banking institutions: check-cashing, pawnshops, financing companies

THE BANK DISCUSSION §What is a bank? §Why do some people choose not to have a bank account? §What are the advantages of having a bank account? §What is the difference between a bank and a credit union?

SERVICES/PRODUCTS OFFERED BY BANKS Debit Cards ATMs

ADVANTAGES OF Your. CHECKING ACCOUNTS money is safe in a checking account. A checking account can help you improve your credit record. You can use a checking account to cash your paycheck and pay bills. You can cash checks at your bank or credit union for free. Carrying checks is safer than carrying cash or leaving your money at home. Your checkbook is a good record of your spending. A checking account may be cheaper than using a check cashing service. A checking account lets you get money from your account 24 hours a day because you can use an ATM.

DISADVANTAGES OF CHECKING ACCOUNTS You have to balance your checkbook every month. Too many bounced checks can damage your credit record and you have to pay a fee if you bounce a check. You may have to pay a fee or keep a minimum balance. You may have to pay to have checks printed. You may be charged a fee for using an ATM.

Banks and credit unions What is the difference between a bank and a credit union? Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Banks ü Banks are financial institutions that take deposits, engage in lending and operate for a profit ü Banks offer checking and savings accounts to the general public Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Credit unions ü Credit unions are financial cooperatives that are owned by and serve individuals with a common affiliation • for example, a workplace, church, employees union, neighborhood, etc. ü Credit unions offer checking and savings accounts to members Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

SELECTING A BANK OR CREDIT UNION Does the financial institution have branches or ATMs where you live or work? What hours are they open? Do they close before you get off work? Are they open on the weekend? Is the staff friendly and eager to help you open an account? Did they hand you papers and send you on your way, or did they take time to explain their services, products and fees? Did they try to convince you to get an account you did not want? If you speak a language other than English, did they still take the time to talk to you?

TIPS FOR FINDING THE RIGHT ACCOUNT Money needed to open an account Minimum balance requirement Monthly service charges Fees for bouncing checks (overdraft charges) Number of checks that you can write Number of withdrawals that can be made. Any holds on deposits

Checking and savings accounts What are some of the advantages to having a checking and savings account? Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Advantages of checking and savings accounts include: ü Your money is safe ü Each account is insured ü Checking account records provide proof that you paid bills and help you keep track of spending ü Money in a savings account earns interest to help it grow ü Less expensive than check-cashing stores and money orders Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Checking accounts ü Checking accounts allow you to: • • Pay bills with checks/online bill pay Get cash, transfer money and make purchases using your debit card ü Access your checking account: • • • At an ATM or bank branch On your computer (online banking) By phone or using a data-ready mobile device (mobile banking) Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Banking/checking online ü Also known as Internet banking ü Via a secure website operated by your financial institution (or via an “app”) ü Pay bills, view transactions, transfer funds between accounts ü Benefits: convenient, low or no acct fees, quick access to info, savings on postage and checks ü But, may still need to visit the ATM Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Safe Internet banking ü Make sure the institution is legitimate ü Create a strong password ü Keep your ID and password private ü Don’t fall for phishing scams ü Be careful when using public wireless networks (Wi-Fi) or shared computers ü Monitor account activity regularly Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Keep a record of your transactions: ü So that you don’t forget checks, cash withdrawals, and purchases with your debit card • If you forget to record a transaction, it could overdraw your account. This could lead to a fee for “non-sufficient funds” (bounced check) being charged to your account. ü So that you know how much money you have in your account ü So that you can track your spending and stick to a budget Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Savings accounts How is a savings account different from a checking account? Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

What is interest? ü Interest is the cost of borrowing money • • When a bank/credit union gives you a loan, you pay interest to them When you keep your savings in a bank/credit union, they pay interest to you ü APR, or annual percentage rate, is the annual amount of interest, expressed as a percentage of the amount loaned or borrowed Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Interest ü Simple interest • $100 on deposit for 10 years at a 1% APR would earn $10 in interest ü Compound interest • The same deposit, compounded monthly, would earn $10. 51 (51¢ more because of compounding) • Compounding earns more, especially if you save regularly Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

THINGS YOU NEED TO KNOW ABOUT ATMS Access to your account seven days a week, twenty-four hours a day. ATMs encourage you to take more money out of your account that you need. If you do not keep track of how much you are getting from the ATM, you will not know what is in your account and you may start to bounce checks. ATMs are not always free. Before opening an account, make sure that you understand the financial institution’s rules about ATMs. Your financial institution probably will not charge you for using ATMs that they own, but others may charge you for using their ATMs and your financial institution may charge you for using an ATM that they do not own. If your bank or credit union owns the ATM, their name will be on it.

WRITING A CHECK Always write in ink Always write clearly and be sure spelling is correct Record each check in your checkbook register § The date on which you are writing the check. Do not postdate. § The person or business to whom the check is to be paid (the payee). § The dollar amount of the check written in numbers. § The amount of the check in words. § Signature § Memo

MAKING DEPOSITS Your account number Your name and address The date the check is being deposited into your account This section is divided as follows: § Currency-write the amount of paper money that you are depositing. § Coins- Write the amount of change that you are depositing. § Checks-Write the amount of each check that you are depositing. If you run out of room, write on the back of the deposit slip. Make sure that the dollar and cent amounts are in the right columns. § Total Checks- Add up all the checks that you are depositing and write it here. § Subtotal-Add up currency, coins and checks. Then write total here. § Less cash-If you want cash back, write the amount here. § Total-Write the total amount of the deposit here. This is the subtotal minus the cash you are getting back. § Your signature (This is only required if you are getting cash back. )

THINGS YOU WILL NEED TO OPEN AN ACCOUNT First, middle and last name Social security number Photo ID (drivers license or state ID) Home address Home telephone number Work address Work telephone number Name and address of two people who could serve as references A reference is someone who will tell the bank or credit union that you are a good and hard-working person, that you can handle your financial and work situations and that you can be trusted to take care of a checking account.

IMPORTANCE OF SAVING & INVESTING Investing Basics (see pp 70 & 71) Savings vs Investing Risk and Return (see p 74) Time is on Your Side (see p 76)

Certificates of deposit (CDs) What is a certificate of deposit? Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Certificates of deposit (CDs) ü A certificate of deposit, or CD, is a kind of savings account in which you leave your money on deposit for a set period of time in order to earn interest ü The longer the term of your CD, the higher your interest rate will be ü If you withdraw your money before the term ends, you will lose interest and might have to pay a penalty Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Opening an account ü Questions to ask: • What is the minimum to open an account? • What is the interest rate on the account? • Is there a monthly fee? • Is there any way to avoid monthly fees? - (more questions on next slide) Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

More questions to ask when opening an account • Is there a maximum number of checks I can write each month? • Is there a fee for using your ATMs? • What happens if my balance falls below the minimum requirement? ü TIP: Use the Money. WI$E worksheet in your folders as a guide when you apply for an account Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Opening an account What should you bring with you when you are opening a new account? Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Identification ü When you go to a financial institution to open a new account, bring: • Photo identification, such as a driver’s license, state ID card or passport • Proof of your address, such as a utility bill or lease • Your Social Security number for tax purposes Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Savings account application ü Ownership ü W-9 certification ü Optional services • ATM cards • Linking accounts ü ATM fees ü Sign and date your application Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Keeping your account straight ü Once you have an account, write down and deduct in your check register: • • Every check you write Every debit card transaction you make (including “cash back” at stores) ATM cash withdrawals Any bank fees you pay Any online transactions Any automatic payments/deductions All deposits and credits Money. WI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP