Lesson 16 - Mr. Wilson: The Digital Classroom



AOF Principles of FinanceLesson 6BankingStudent ResourcesResourceDescription Student Resource 6.1Reading: Choosing a BankStudent Resource 6.2Assignment: Banking PosterStudent Resource 6.3Graphic Organizer: Investigating Banking Services Student Resource 6.4Reflection and Peer Review: Banking PosterStudent Resource 6.5Example: Bank StatementStudent Resource 6.6Independent Practice: Check Register and Reconciliation FormStudent Resource 6.1Reading: Choosing a BankAfter working all summer, Ruby had managed to save nearly $400. Her best friend Tia had recently opened her own bank account and had been telling Ruby all about the cool services that it provided her. Tia had her own ATM card that she used almost everywhere. She could write her own checks, and she even had a special savings account for teens. Tia could also access her account online, which allowed her to double-check her balance as well as her spending and deposit transactions. Ruby had always felt comfortable with her own savings method of stashing her money in a box in her dresser drawer. She could pull from it whenever she wanted. She liked the feeling of being in control of her own cash. However, with all of the positive things that Tia was saying about her own bank account, Ruby decided that she should research opening up an account for herself. With nearly $400 stashed in her drawer, now seemed like the perfect time to do it. Ruby knew that Tia was very happy with the services that her bank offered, but she wondered if it was the right bank for her. Ruby’s parents had been banking at the local credit union and seemed content there. Her uncle completed all of his banking needs online. And her older sister held an account at a commercial bank that had ATMs all over town. How would she know what bank to choose? How would she know what types of accounts she should open? All of these questions and more flooded her mind. Firms That Offer Banking ServicesThere are many different options available to someone who is looking to open up a bank account. You may remember that commercial banks, credit unions, and savings banks/thrifts offer banking services. But so do online-only banks, mutual fund companies, and even investment and mortgage companies. Originally, banks specialized in certain products and services. In the last couple of decades, though, many institutions have broadened their offerings to meet most people’s needs and attract more customers. But even though many of these firms offer the same overall services, each institution has its own unique characteristics that customers should be aware of.How Do I Choose a Bank?Most of your parents have a particular grocery store or market where they shop on a regular basis, and the reasons for choosing this store are probably different for each parent. Maybe it has a great meat department or a wonderful health food section. Maybe it has great special deals, or it’s in a convenient location. People have a wide range of reasons for shopping in one store instead of another. This is true for institutions that offer banking services as well. People have different reasons for choosing where they will place their money. A person’s choice of bank is most often determined by the products and services offered (including related fees) and the convenience (branch location, hours, website, etc.). Services and Products Offered by Banking InstitutionsThe services that banks offer can be confusing and complex, but as long as you do your research you should be able to find the right institution for you. The following will give you a general overview of some of the services that banks generally offer. Savings account services give you a safe place to store your funds. One of the main benefits to opening a savings account is the money that you earn from the interest. As you may remember, interest is the money the bank pays you so that they can use your money to loan out. Banks will even pay you interest on the money that they’ve paid you in interest, which is called compound interest. The amount of interest that your money earns depends upon the banking institution. It also depends upon the type of savings account that you choose. Savings account services generally include regular savings accounts, which allow you the flexibility to take your money out quickly and easily. The downside is that the interest earned is fairly low. You may recall that certificates of deposit (CDs) require that you leave your money in for a certain amount of time (or term). The date that the term is up is known as the maturity date. CDs offer higher interest rates than a regular savings account, but when you can have access to your money is restricted. If you take your money out before the maturity date, you will have to pay a penalty. Money market accounts require a higher minimum balance than a typical savings account but usually pay a bit more interest. With a money market account the interest is not set; it varies from month to month as the market rates change. With any type of savings account service that you choose, you must do your research to find the product that will offer you the very best interest rate as well as not penalize you when you occasionally withdraw cash. The most common payment service that banking institutions offer is a checking account. When you place money in a checking account, you can withdraw it at any time and write checks against the balance. Some institutions require that you keep a minimum balance in your checking account, and will charge you a fee if your account balance falls below this level. Some have no minimum balance requirement. There are also types of checking accounts that only allow you a certain number of checks per month. There are many different types of checking accounts. The fees and charges can vary from institution to institution, so it is critical to research restrictions and fees. Loan services generally fall into two categories: secured loans and unsecured loans. Secured loans are loans that are secured by collateral (property such as automobiles and real estate), while unsecured loans are loans obtained without collateral. In most cases, using a credit card to make a purchase is considered an unsecured loan. Banks can lend you money for your short-term needs as well as your long-term needs. If you are in the market to buy a home or a car, you would definitely research the long-term loan services. Interest rates, loan fees, and loan terms are some of the topics that you would want to know about. Again, doing your research and comparing interest rates and fees for loan services is critical.Electronic banking services include, but are not limited to, ATM access, direct deposit, automatic payment services, and online account access. ATM services allow you to withdraw cash from your account at specific computer terminals. Be careful with this service, because it is common for banks to charge as much as $3 per transaction for this convenience when you use a bank other than your own. Direct deposit allows government-issued checks or payroll checks to be deposited directly into your account. If you opt for this service, some banks will even waive your checking account service charge. Automatic payment allows the banks to draw a certain amount of money from your account to pay your bills. For example, many people choose to have their utility bills, car payments, and even mortgage payments automatically deducted from their accounts on a monthly basis.The Bottom LineOne of the most important steps to choosing the right banking institution is to do your research. Visit the bank branch and speak to a customer service representative about the bank’s services and go online and get specific information about the bank’s fees and charges. You should look for competitive interest rates and inquire about the specific fees and restrictions that are associated with the specific services and products that you need. You should also take into consideration your lifestyle. For example, if you use the ATM frequently and you choose a small credit union to handle your money, you may be stuck with some very large ATM fees, since many small institutions do not have multiple locations. If you have an extremely busy schedule, you may value a bank that has extended hours or online services. Most of all, doing the proper research will ensure that you choose the right bank. Student Resource 6.2Assignment: Banking PosterDirections: Your work team is to create an informational poster that highlights the specific banking institution that you researched. Begin by using Student Resource 6.3, Graphic Organizer: Investigating Banking Services, and review and discuss the information you found. As a group, decide how you would like your poster to look. Next, create a rough draft of how your poster will be laid out, including the language that you will use and how you will use color and graphics to enhance the visual presentation of your work. Make sure to carefully read through the following instructions before beginning your poster, and if you have any questions, ask your teacher before you begin.Use the following guidelines to construct your poster:Include the name and website of the institution.Choose two savings account services, two payment services, and two loan services to highlight. Choose two other services to highlight.Make sure to describe all services in terms of what they offer, along with their fees, interest rates, special restrictions, and benefits to the consumer.Use color and graphics to enhance your poster’s appeal.As a group, review your poster before you consider it finished. Make sure your assignment meets or exceeds the following assessment criteria:The name and website of the institution are clearly and correctly displayed on the poster.The poster accurately and effectively describes the savings account, payment, and loan services that are offered by the institution.The poster accurately and effectively describes two other services and/or products that are offered by the institution.The poster presents the fees, interest rates, and other benefits to the customer as they pertain to each product that is highlighted.The poster is well organized and is designed to make it easy to find information.The poster is neat and legible, and uses proper spelling and grammar.Student Resource 6.3Graphic Organizer: Investigating Banking ServicesStudent Names:_______________________________________________________ Date:___________Directions: Use the following resource as a place to organize your research on banking firms and their services and products. Remember, your group is required to research the savings account, payment, and loan services of your chosen institution. Although within each of these services you will find many choices, your group will need to choose only a couple of these options to highlight. Once you have completed the investigation of the required services, you will then have the opportunity to pick two other services that your group would like to highlight. All products and services must first be described in terms of what they offer, their fees, interest rates, special restrictions, and benefits to the consumer, and any other pertinent information may be added as needed. NameWebsiteLocation and Hours (nearest to you)Type of Firm (commercial bank, credit union, etc.)Describe the savings account, payment, and loan services of your specific institution.Products and ServicesDescription of services, including fees, interest rates, special restrictions, and benefits to consumerSavings Account Services (regular, CDs, money market)Payment Services (checking accounts)Loan Services Research two other services and/or products offered by your specific institution. For example, electronic banking services, credit cards, investment services, mortgages, individual retirement accounts, insurance, and/or financial planning.Products and ServicesDescription of services, including fees, interest rates, special restrictions, and benefits to consumerOther product and/or service:____________Other product and/or service:____________Student Resource 6.4Reflection and Peer Review: Banking PosterStudent Name:_______________________________________________________ Date:____________ReflectionAs a result of creating our poster, I learned the following:About the subject matter:About conducting research: About working in a group:Peer ReviewFor each poster, respond to the following:Name of banking institution:Which product offered by this banking institution is the best value and why?Name of banking institution:Which product offered by this banking institution is the best value and why? Name of banking institution:Which product offered by this banking institution is the best value and why?Name of banking institution:Which product offered by this banking institution is the best value and why?Name of banking institution:Which product offered by this banking institution is the best value and why?Name of banking institution:Which product offered by this banking institution is the best value and why?Name of banking institution:Which product offered by this banking institution is the best value and why?Student Resource 6.5Example: Bank StatementIntroductionOne way to keep track of your spending and earning is to review and balance your monthly bank statement. A bank statement is a document issued by a bank to its customers. It is a record of an individual’s debit (money paid out) and credit (money received) transactions over a given period of time. Bank statements give you a summary of every transaction that has taken place in your bank account. When you receive your bank statement, you should read and review it as soon as possible so that you can contact your bank immediately if you notice any errors in the record of transactions. Although the bank statement is a very helpful service that banks offer to help you manage and monitor your money, it is critical to keep careful records of your own spending and earning transactions. Every now and then even banks make mistakes. Banks statements are usually issued on a monthly basis and generally include the following information: Statement record datesYour name, address, and account numberAccount summary, which gives you a quick snapshot of your beginning balance, your total deposits and withdrawals (money taken out of the account), the total service charges and/or fees, and your ending balance for the specific statement record datesAll deposits, including direct deposits, credits, ATM deposits, and deposits made in a branch storeWithdrawal list, including ATM withdrawals, detailed check list, debit card transactionsInterest earnedFees, if anySample Bank StatementStudent Resource 6.6Independent Practice: Check Register and Reconciliation FormStudent Name:_______________________________________________________ Date:____________Reconciliation It was a typical afternoon for Sam. He was rushing from school to work and needed to make a quick stop at the gas station. He had been driving on empty for some time now and knew that there was no way that he would make it to work today without filling up. He took his ATM card out, inserted it into the pump and waited. After a long silence out came his card, accompanied by a high-pitched tonal sound. Sam inserted his card again, only to experience the same effect. Feeling frustrated, he brought his card to the attendant to see what the problem was. Apparently, Sam’s account was empty. “Insufficient funds,” the attendant replied.“What? I know that I have money in my account. How could that be?” asked Sam. The young businessman behind him replied, “I don’t mean to eavesdrop, but have you reconciled your account lately?”“Have I done what?” Sam said. Account reconciliation is a process that compares two sets of forms to make sure that they correspond. The act of reconciling your bank account is very important because it helps to ensure that the money leaving your account matches the actual money that was spent. In order to reconcile your account, you must keep careful records of how and when you spend your money. There are two parts to most personal checkbooks. There are the checks, of course, where all the relevant information—date, payee, amount—is written. But checks can’t be used to keep track of the account, because as soon as a check is written it is handed over to someone else. Can you imagine keeping all that information in your head? That’s where the second part of the checkbook—the check register—comes in. The check register is a separate place where the account holder writes down the information that went on the check. By keeping track of this information separately, account holders can reconcile their accounts by comparing check registers (their records) against their statements (the bank’s records). Banks make mistakes sometimes, so smart account holders keep track of all their transactions and save all their receipts. There’s an additional complication to check reconciliation, and that is lag time. It’s very likely that between the time the bank closes the month, prints your statement, mails it, and you receive it, you will have written more checks, made deposits, used your debit card, or taken money out of the ATM. It’s also possible you wrote a check a while ago that the payee hasn’t cashed, so the bank hasn’t debited it from your account yet. With all these variables, how do you reconcile the balance you show in your checking account today with the bank statement you received today that reflects the balance the bank showed last week?The process is pretty easy for people who record their transactions in their check registers. By removing the transactions that happened during the lag time—by “backing them out” of the records—an account holder can reconcile his or her records with those of the bank.Check RegisterThe following is a hypothetical check register that reflects the credit and debit transactions that are shown on Student Resource 6.5, Example: Bank Statement. Use the sample below, the model bank statement, and the reconciliation form to reconcile the account. When you have completed the exercise, compare your answers with a partner. DateTransaction DescriptionPaymentDebitBalance1/03Deposit123.47320.516041/07Cinema 814.33306.181/07ATM20.00286.186051/12ITA car insurance76.21209.976061/12FX clothing23.39186.58Debit 1/13Sam’s Burgers12.02174.561/15Deposit33.17207.731/20Withdrawal85.00122.731/22Payroll deposit179.04301.776071/22Books-n-More7.75294.026081/28KC’s Music51.26242.761/28Deposit-return29.71272.476091/30Jack’s Grill17.92254.551/30Deposit31.00285.552/1Deposit78.14363.696102/1Visa payment82.00281.69Interest earned0.11281.80Bank fees4.50277.30Follow the steps on the forms below to reconcile the hypothetical account. In your checkbook, check off all of the checks paid and deposits credited that appear correctly on your bank statement. Then list all the outstanding checks (the ones that haven’t been charged to your account) below. You can identify them as the ones left without a check mark. Now list all of your deposits or other credits that you have recorded in your checkbook but were not shown on the statement. ................
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