BANKING BASICS ACCOUNTS: FROM SAVINGS TO CHECKING

Transcription

1 BANKING BASICS ACCOUNTS: FROM SAVINGS TO CHECKING

2 INTRODUCTION This Teacher s Guide provides information to help you get the most out of Banking Basics, Accounts: From Savings to Checking. The contents in this guide allow you to prepare your students before using the program, assist them as they navigate through the program, and present follow-up activities to reinforce the program s key learning points. Covering a large range of money-related topics and co-produced with UnitedTrust Bank, this program identifies the different types of savings and checking accounts. This CD-ROM guides users through the ins and outs of checking and savings accounts. It also explains procedures for getting money from ATM machines, paying bills by mail, and making profits on bank-sponsored investments. LEARNING OBJECTIVES After viewing the program, users will be able to Define and illustrate the concepts of banking and interest. Distinguish the different types of checking and savings accounts. Explain how to open and use each type of bank account. Recognize the advantages and disadvantages of each type of bank account. Describe the different parts of a check and of a check register. Illustrate the lifecycle of a check. Explain alternate banking methods. EDUCATIONAL STANDARDS This program correlates with the National Standards for Business Education and Economics. Business Education Students will be able to Understand financial concepts pertaining to personal and business finance. Examine various sources of financial services; identify financial resources, rights and responsibilities available to individuals and institutions. Understand money management principles as they relate to personal decisions. Utilize appropriate banking services. 2 Economics Students will be able to Evaluate information about available financial services. Understand the role of financial institutions in saving, investing, and borrowing. Compare different means by which savings can be invested and the risks and rewards each poses to the consumer. Understand that money makes it easier to trade, borrow, save, invest, and compare the value of goods and services. Understand that the basic money supply in the United States consists of currency, coins, and checking account deposits.

3 PROGRAM OVERVIEW More than ever, people want convenience and flexibility in how they buy things and make payments and they want a profit on their deposits, too. Banking Basics addresses these concerns, while illustrating the ins and outs of checking and savings accounts. The CD- ROM begins with a brief review of what banks need to operate. Then, through detailed descriptions of both types of accounts, users learn to distinguish which attributes apply only to savings accounts, which to checking accounts, and which apply to both. The section called "Alternate Ways to Bank" informs users of alternate ways to get cash, pay bills, and complete transactions other than by visiting a bank in person. MAIN TOPIC AREAS Topic 1: How Banks Operate This section focuses on the definition, roles, and types of banks, including commercial banks, savings banks, and credit unions. Banks must have deposits, reserves, and federal reserve backing in order to exist and operate successfully. Banks earn a profit by loaning money and collecting interest on that money, and charging fees for their services. Banks offer a number of services to their patrons, including savings accounts, checking accounts, credit cards, Automatic Teller Machines (ATMs), online banking, safety deposit boxes, investments, and loans. Topic 2: How to Open an Account This section lists the items you need to open a bank account. Most important is proof of identity (birth certificate, driver s license, picture I.D.). You also need your social security card, parental consent (if you are under the age of 18), the minimum allowable account balance for deposit, and a signature card. Topic 3: Savings Accounts This section defines savings accounts as long-term investments. Money is deposited and withdrawn using the appropriate bank slips. The savings account register and statement help account holders to track their balance, interest earned, and fees accrued. This section also explains how savings accounts profit their owners money by collecting interest, and the different types of savings accounts available. Topic 4: Checking Accounts This section defines checking accounts, and explains that the purpose of a checking account is to complete daily monetary transactions. Writing checks and using debit cards are the tools used for making deposits, withdrawals, and payments. A register and statement are used to assist the account holder with keeping track of his/her account balance, fees paid, interest earned, and possible overdrafts. Finally, this section describes the anatomy of a check, the life cycle of a check, and how to write checks. Topic 5: Alternate Ways to Bank This section describes three alternate ways to bank other than visiting a bank in person. It defines the purposes and functions of ATMs, debit cards, and online banking. Copyright 2002 Meridian Education Corporation 3

4 FAST FACTS 1. The two ways banks make a profit are by charging fees and by collecting interest on accounts and loans. 2. There are basically three types of banks: large chain banks, small neighborhood banks, and online "virtual" banks. 3. Forged and counterfeited checks account for more than $12 billion in losses per year. 4. The first savings banks date back some 6,000 years to ancient Egypt, where a customer s account was kept not in coins or notes, but in cattle. 5. Today s banks allow people to perform everyday financial transactions, such as paying bills or borrowing money. 6. The two main sources of money for a bank are deposits and reserves. 7. Banks are the main sources of credit cards. 8. A signature card acts as a contract between you and the bank. 9. Banks offer five basic types of savings accounts statement accounts, passbook accounts, certificates of deposit, money market accounts, and individual retirement accounts. 10. It is possible to link your checking account and savings account together to avoid overdraft. 11. An ATM gives you access to your bank accounts 24 hours a day, 7 days a week, through using your ATM card. 12. Debit cards are usually accepted everywhere that credit cards are accepted. 13. Online banking generally saves banks and customers money on transactions. 4 VOCABULARY TERMS Automatic Teller Machine (ATM): A machine that allows access to your bank accounts and to many banking transactions through the use of an ATM card. Bank: A business that provides money-related services to customers. Certificate of Deposit (CD): An investment tool that is the highest interest-bearing account offered. Investors must leave money in the CD for a certain period of time in order to earn interest and avoid penalty. Check: A small form imprinted with your name, address, and bank account number, to be filled in with the name of the person being paid and the amount whenever you want to use money from your checking account to pay for a purchase or a bill. Checking account: A type of bank account that allows you to write checks against the money in your account. Checking register: A small book that helps you keep track of the checks you write and the money you deposit into your checking account. You write the date, check number, and amount of the check (or deposit) in the register each time you write a check or make a deposit; this allows you to calculate the balance in your account. Clearinghouse: A place where banks exchange checks and settle accounts. Every bank has a clearinghouse that processes its checks. Credit card: A payment device in the form of a small card that allows you to take a loan to pay for a purchase. Compound interest: Interest paid on the money you deposit, and also on the interest you have earned and keep in the bank. Debit card: A payment device that looks like a credit card, but results in money being taken directly out of your checking account when used.

5 Deposit: The money people give to the bank in savings accounts, checking accounts, and other accounts. Deposit slip: Small form imprinted with your name and account number that you fill out whenever you want to make a deposit into your account. Fees: Money charged for services. Individual Retirement Account (IRA): Savings account that lets you deposit a certain amount of money each year for your retirement. There is a large penalty if the money is withdrawn before retirement age. You do not have to pay taxes on the money until it is withdrawn from the account; when it is withdrawn at retirement age, you will be in a lower tax bracket. Interest: The money you pay to borrow money, or the money the bank pays you for using your money. Investments: Tools or accounts that allow you to make money through deposits. Loans: Money borrowed from a bank, and requiring the payment of interest to the bank for the privilege of borrowing. Minimum deposit: The minimum amount of money that you must deposit in order to open an account. Money market account: An investment tool similar to a savings account, but earning a much higher rate of interest, and with restricted access to your money through limits on the number of withdrawals you can make each month. Online banking: An Internet banking service that allows you to make the same banking transactions you make in person from a computer with Internet access. Overdraft: A check written for an amount that exceeds the balance in your account. This is also called "bouncing a check." Passbook savings account: A type of savings account for which you are given a small passbook (similar to a savings register) that must be presented to the bank teller for all transactions. Reserves: A supply of money or "stash of cash" the bank keeps in its vault. Safety deposit box: A fireproof box in a bank vault used for storage of personal papers and valuables. Savings account: A type of bank account that allows you to store" your money and earn interest on that money. Savings register: A small book for recording all transactions in a savings account. Signature card: A form or card that you sign when you open a bank account, used for signature comparisons to prevent fraud; it also acts as a contract between you and the bank. Statement: A summary of the transactions for an account mailed periodically to account holders. Statement savings account: Now the most common type of savings account, a type of account where the bank sends you a statement monthly or quarterly. Withdrawal slip: Small forms imprinted with your name and account number that you fill out whenever you want to withdraw money from your account. 5

6 PRE-PROGRAM DISCUSSION QUESTIONS 1. Why is it important to save money? 2. What is a good age to open your own savings account? Checking account? 3. Lists some reasons why you would need a checking account. 4. How do computers help to make banking easier? 5. Why is it necessary to have requirements to open a bank account? POST-PROGRAM DISCUSSION QUESTIONS 1. Why would someone want to open a savings account instead of keeping their money at home? 2. Name two types of accounts you can use to save money to buy something you have always wanted. What are the pros and cons (if any) of each account? 3. Do you think that a time will come when people will no longer need to use cash for payments and purchases? What type of banking alternatives can currently be used in place of cash? What type of banking alternatives might be available in the future? 4. Is it possible for a checking or savings account balance not to match the balance on the bank statement? Why might there be some discrepancies? GROUP ACTIVITIES 1. Construct a mock bank in the classroom. Have students create sample signature cards, deposit slips, withdrawal slips, checks, passbooks, and money. Assign some students to be bank tellers and others to be customers. Give each student a chance to complete the following transactions: Open an account (checking or savings) Make a deposit Make a withdrawal Cash a check Change the balance in a passbook according to the deposits and withdrawals 2. Create a list of items that students would be interested in purchasing. Find pictures of each item in a catalog, advertising flyer, or on the Internet. Place these items in "stores" throughout the classroom. For example, create a music store, a fast food restaurant, a clothing store, a sporting goods store, etc. Be sure to put prices on every item. Photocopy the blank check and check register at the end of this Teacher s Guide, and give several checks and a check register to each student. Let students shop until they run out of money, without bouncing any checks. For each purchase, students must write a check and then update their checking account register. 6 INDIVIDUAL STUDENT PROJECTS 1. Make a list of everything you might spend money on this year. Include things you need (clothes), want (new CDs), and need to buy for others (Mom s birthday present), as well as things such as movies, food, and entertainment. Estimate how much money you would need for each of these expenses, and then calculate how much money you would spend in a year. Let s say you opened a savings account with $100, which earned 5% interest per year. How much money would you save in a year if you saved $5 per week? Would you have enough money to cover your expenses?

7 2. How much money do you consider to be a lot of money? Consider the prices of the items listed below. Find out what these items cost today, and then ask your parents what these items cost when they were your age. How much money did your parents get for an allowance? How long would it take your parents to save for the items on this list? How long would it take for you to save for the items on this list? Movie ticket Candy bar Music CD (Parents: Cassette tape or record) Bicycle Pair of jeans Concert ticket Burger, fries, and a soda INTERNET ACTIVITIES 1. Visit and click on Try It to find the compound interest calculator. Let students experiment with the amount of money they want to save, and for how long. See how much they can earn over the years if they deposit the money into a savings account that earns compound interest. Does this give students an incentive to open a savings account? ASSESSMENT QUESTIONS Q: The two main sources of money needed for a bank to operate are: (a) coins and dollars (b) silver and gold (c) deposits and reserves (d) deposits and withdrawals A: (c) Deposits and reserves Feedback: Deposits are the sums of money people place in their savings or checking account. Reserves consist of money that the bank keeps in its vault in the event that many customers withdraw very large sums of cash all at once. Q: If you are under the age of 18, what must you have in order to open a checking account in addition to proof of identity (social security card, a picture ID, etc.)? (a) A job (b) A parent or legal guardian (c) At least $1,000 (d) Your birth certificate A: (b) A parent or legal guardian Feedback: Your are not required to have a job, and, although you may need to keep a minimum amount of money in a checking account, you would not need at least $1,000 to open an account. You may need your birth certificate if you do not have a photo ID. However, if you are under 18, you must also bring a parent or legal guardian with you when you open the account. 7

8 Q: What are two reasons someone may choose a small neighborhood bank over a large chain bank? (a) Location and friendly employees (b) Convenience and free checking (c) Online banking and personal attention (d) Security and free checking A: (a) Location and friendly employees Feedback: Small neighborhood banks are best known for their local address and friendly employees. Since banks are located in the neighborhood it is easy to stop in for a visit. Employees at neighborhood banks often go out of their way to make customers feel important by providing personalized service that sets them apart from larger banks. Q: For which of the following services would a bank not typically charge a fee? (a) Using the ATM (b) Bouncing a check (c) Making a deposit (d) Not meeting the minimum balance requirements A: (c) Making a deposit Feedback: Some banks charge fees for using an ATM, for not meeting the minimum balance required for your account, and/or for overdrawing on your account. Fees are not typically charged for signing up for online banking, making a deposit, or closing an account. Q: How many different types of savings accounts can banks offer their customers? (a) Two (b) Three (c) Four (d) Five A: (d) Five Feedback: Banks offer five basic types of savings accounts to their customers. These are statement savings accounts, passbook accounts, certificates of deposit, money market accounts, and individual retirement accounts (IRAs). Q: What is the most common type of savings account offered by banks? (a) Statement savings accounts (b) Passbook accounts (c) Money market accounts (d) Individual Retirement Accounts (IRA) A: (a) Statement savings accounts Feedback: Statement savings accounts are the most common type of savings account. With this type of account, banks send you a monthly statement detailing all your transactions, interest applied, fees charged, and the balance for that month. 8 Q: Which of the following is an example of how checking accounts and savings accounts are the same? (a) Neither pays interest (b) Withdrawals and deposits can be made using an ATM

9 (c) Both use checks to withdraw money (d) Both can be used to make day-to-day purchases A: Withdrawals and deposits can be made using an ATM Feedback: Transactions such as withdrawing and depositing money can be made using an ATM for both a checking and a savings account. Checking accounts usually do not pay interest, whereas savings accounts do. Checking accounts use checks instead of withdrawal slips to withdraw funds. Purchases can be made by writing checks or using a debit card which deducts the amount of the purchase from your checking account. Q: What type of information should appear on the memo line of a check? (a) Date the check is written (b) Amount of the check (c) Purpose of the check (d) Routing number of the bank A: (c) Purpose of the check Feedback: The memo line on the check does not have to be filled in. However, the purpose of the memo line is to make a note for your own records indicating why this check was written. Q: Which organization provides a place for banks to exchange checks and settle accounts? (a) Financial Management Service (b) Bank clearinghouse (c) Bureau of Public Debt (c) Internal Revenue Service A: (b) Bank clearinghouse Feedback: A bank clearinghouse is a place where banks exchange checks and settle accounts. Every bank has a clearinghouse that processes its checks. The Financial Management Service, the Bureau of Public Debt, and the Internal Revenue Service are all part of the U.S. Treasury and have nothing to do with clearing checks. Q: Which of the following is not one of the conveniences of having a debit card? (a) No bills to pay at the end of the month (b) Usually accepted everywhere that credit cards are accepted (c) No fees for using your debit card (d) You can spend more money than you have in your account A: (d) You can spend more money than you have in your account Feedback: Although it would be a nice convenience, you cannot use a debit card to spend more money than you have in your account. A debit card looks like a credit card, but it functions as a check. A debit card purchase is deducted from your checking account, so there must have enough money in the account to cover the cost of your purchase. 9

10 ADDITIONAL RESOURCES American Banker Online Banking on our Future Federal Deposit Insurance Corporation (Search on Learning Bank ) The Mint Sovereign Bank Presents: KidsBank.com United States Mint Ultimate Kids Money Book, by Neale S. Godfrey. New York: Simon & Schuster Books for Young Readers, Money Sense for Kids, by Hollis Page Harman. Barrons Juveniles The Kid's Guide to Money: Earning It, Saving It, Spending It, Growing It, Sharing It, by Steve Otfinoski. Scholastic Trade, Opening a Bank Account (Life Skills), by Stuart Schwartz, Craig Conley. Capstone Press, Money Management Poster Set, Posters, Meridian Education Six motivational full-color posters cover budgeting, financial services, investing, personal debt, loans, and credit cards. Order # GHW27761, Dollars and Sense: An Interactive Guide to Money Management, CD-ROM, Cambridge Educational This program teaches users how to gain control of their finances by creating a budget or spending plan and setting realistic financial goals. (Macintosh; also available for Windows) Order #GHW12129, Money Management Series, (available in VHS and CD-ROM formats), Meridian Education This series covers four major areas of financial management: financial services, budgets, credit, and financial planning. (Windows only) Order #GHW11513 (VHS); Order #GHW11518 (CD-ROM),

11 Check Register Name: Check # Date Description Amount Balance $

12 Name: Street: City, State, Zip: Phone: 88-32/987 3 Date PAY TO $ THE ORDER OF DOLLARS USA National Bank Independence, PA FOR ll ll ll 03 Name: Street: City, State, Zip: Phone: 88-32/987 3 Date PAY TO $ THE ORDER OF DOLLARS USA National Bank Independence, PA FOR ll ll ll 03 12

13 P.O. Box 911 Monmouth Junction, NJ CALL TOLL FREE COPYRIGHT 2002 MERIDIAN EDUCATION CORPORATION 13