Lesson Component Description

Purpose In the Financial Services Topic, students gain a fundamental understanding of the types of financial institutions and the fundamentals of using bank accounts, including how checking accounts work, what fees they charge, and how to maintain an account.

Learning Objectives 1. Identify the types of financial institutions. 2. Compare and contrast the characteristics of banks and credit unions. 3. Identify the types of services provided by financial institutions. 4. Explain the benefits of having a checking account. 5. Demonstrate ability to write and endorse a check. 6. Demonstrate ability to make deposits and withdrawals. 7. Describe the characteristics and uses of ATM and debit cards. 8. Recognize common fees and explain ways to avoid paying unnecessary fees. 9. Summarize the importance of keeping accurate records and reconciling an account.

Time Required 250 Minutes

Materials Student Guide, Teacher Guide, PowerPoint, Quiz

Procedure Follow the PowerPoint and/or Use the Teaching Guide as students follow along with the Student Guide. The guides are merely a framework for the teacher and students. Implementing additional resources to engage students is highly recommended.

Homework Recommended but feel free to develop your own Homework assignments 1. Have students discuss with their parents how they maintain and reconcile their financial accounts. Have them share with the class. 2. Have students write a two-page report summarizing different financial institutions including advantages and disadvantages of each. 3. Have students reconcile an account using an account register and bank statement. 4. Have students research online budgeting tools and share results with the class.

Assessment Quiz – 10 questions (5 True/False; 5 Multiple Choice)

Financial Services Quiz Key 1.T 2.F 3.F 4.F 5.T 6.D 7.A 8.B 9.D 10.D Alignment to Standards

Common Core State Standards: Math 1. Use units as a way to understand problems and to guide the solution of multi-step problems; choose and interpret units consistently in formulas; choose and interpret the scale and the origin in graphs and data displays (N-Q 1). 2. Choose a level of accuracy appropriate to limitation on measurement when reporting quantities (N-Q 3). 3. Explain each step in solving a simple equation as following from the equality of numbers asserted at the previous step, starting from the assumption that the original equation has a solution. Construct a viable argument to justify a solution method (A-REI 1). Common Core State Standards: English Language Arts and Literacy in History/Social Studies, Science, and Technical Subjects 1. Integrate and evaluate multiple sources of information presented in different media or formats (RI 7). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (W 1d). 3. Write informative/explanatory texts to examine and convey complex ideas, concepts, and information clearly and accurately through the effective selections, organization, and analysis of content (W 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (W 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach, focusing on addressing what is most significant for a specific purpose and audience (W 5). 6. Integrate multiple sources of information presented in diverse formats and media in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data (SL 2). 7. Acquire and use accurately general academic and domain-specific words and phrases, sufficient for reading, writing, speaking, and listening at the college and career-readiness level; demonstrate independence in gathering vocabulary knowledge when considering a word or phrase important to comprehension or expression (L 6). 8. Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas (RH 2). 9. Integrate and evaluate multiple sources of information presented in diverse formats and media in order to address a question or solve a problem (RH 7). 10. Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms (RST 2). 11. Integrate and evaluate multiple sources of information presented in diverse formats and media (RST 7). 12. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (WHST 4) 13. Draw evidence from informational texts to support analysis, reflection, and research (WHST 9). 14. Write routinely over extended time frames and shorter time frames for a range of discipline- specific tasks, purposes, and audiences (W10, WHST 10).

Common Core College- and Career-readiness Anchor Standards: 1. Determine central ideas or themes or a text and analyze their development; summarize the key supporting details and ideas (CCR Reading 2). 2. Write arguments to support claims in an analysis of substantive topics or texts, using valid reasoning and relevant and sufficient evidence (CCR Writing 1) 3. Write informative/explanatory texts to examine and convey complex ideas and information clearly and accurately through the effective selection, organization, and analysis of content (CCR Writing 2). 4. Produce clear and coherent writing in which the development, organization, and style are appropriate to task, purpose, and audience (CCR Writing 4). 5. Develop and strengthen writing as needed by planning, revising, editing, rewriting, or typing a new approach (CCR Writing 5) 6. Write routinely over extended time frames and shorter time frames for a range of tasks, purposes, and audiences (CCR Writing 10). 7. Prepare for and participate effectively in a range of conversations and collaborations with diverse partners, building on others’ ideas and expressing their own clearly and persuasively (CCR Speaking and Listening 1). 8. Adapt speech to a variety of contexts and communicative tasks, demonstrating command of formal English when indicated or appropriate (CCR Speaking and Listening 6). 9. Demonstrate command of the conventions of Standard English grammar and usage when writing or speaking (CCR Language 1). 10. Demonstrate command of the conventions of Standard English capitalization, punctuation, and spelling when writing (CCR Language 2). 11. Determine or clarify the meaning of unknown and multiple-meaning words and phrases by using context clues, analyzing meaningful word parts, and consulting general and specialized reference Materials, as appropriate (CCR Language 4). 12. Acquire and use accurately a range of general academic and domain- specific words and phrases sufficient for reading, writing, speaking, and listening at the college and career- readiness level; demonstrate independence in gathering vocabulary when considering a word or phrase important to comprehension or expression (CCR Language 6). Web Resources www.fdic.gov www.consumerdebit.com www.smartcheckbook.com www.clearcheckbook.com Video Links Difference Between Banks and Credit Unions: http://www.youtube.com/watch?v=cawzTSVTP2M Difference Between Banks and Credit Unions, Part 2: http://www.youtube.com/watch?v=-rEW6ff3Zao Difference Between Banks and Credit Unions, Part 3: http://www.youtube.com/watch?v=RkQUVs- Kghg A Brief History of Credit Unions http://www.youtube.com/watch?v=Qb_m2mHYebk A Brief History of Credit Unions: http://vimeo.com/3380799

Life Smart Applications 1. Students fill out a check and record the transaction in a check register. 2. Students complete a deposit slip for cash and check deposits and record the transactions in a check register. 3. Students record an ATM withdrawal in a check register. 4. Students record a debit card purchase in a check register. Name______Date______

True or False Questions: 1-5 ______1. The Federal Reserve is considered the central bank in the United States.

______2. One of the reasons you should use a financial institution is because it will double your money.

______3. There is only one type of financial institution.

______4. Credit Unions operate as a for-profit entity.

______5. Banks and credit unions offer many of the same financial services.

Multiple Choice Questions: 6-10

6. Which of the following is considered a Deposit Account?

a. Checking Account b. CD c. Savings Account d. All of the above

7. You want your work paychecks directly deposited to your checking account. What information must you provide to your employer?

a. Routing Number b. Mom’s name c. Check Number d. None of the above

8. You write a check to your landlord and realize after it’s mailed that, the number amount on the check is different than the written amount. How will your financial institution respond?

a. Use the number amount b. Use the written amount

c. Cancel the payment d. None of the above

9. You should always record your money transactions in a ledger or check register because:

a. It will help you reconcile b. You will always know your monthly statement and your balance c. It helps you manage your money d. All of the above

10. Which of the following methods can you use to deposit and or withdraw money from your account?

a. Direct deposit b. Your smartphone c. An ATM machine d. All of the above Sequence:

- Solicit class understanding of the topic - Introduce vocabulary and definitions to provide purpose for reading - Review Key Points - Teacher Tips - Large Group Discussion Questions

Slide 2

Key Points: - Today’s financial institutions are known as banks, credits unions, savings and loans, etc. - The Federal Reserve Act, passed in 1913, established a central bank known as the Federal Reserve System (also known as the Federal Reserve or “The Fed”). - It is composed of 12 regional districts located throughout the country.

Teacher Tips: - Engagement – Ask the students to name some banks and credit unions around town. - Check for Understanding – Ask the students why regulating financial institutions is necessary.

Teacher Reflection:

Financial Services “Getting to Know Your Financial Institution”

Life Smarts: 1. Record transactions in a check register. 2. Write a check and fill out a deposit slip. 3. Reconcile a check register to a monthly statement.

History of financial institutions

Financial institutions serve a very important role in our economy because they manage and safeguard money for individuals, businesses, and the government. Today’s financial institutions (now known as banks, credits unions, savings and loans, etc.) bear little resemblance to the unreliable organizations of the 1700s and 1800s. There were no guarantees in these early days for the businessmen who deposited their money that it would maintain its value or even be available for withdrawal.

The U.S. banking system emerged from the chaotic, unstructured, and unregulated early days to the sound and safe banking system we have today. The Federal Reserve Act, passed in 1913, established a successful central bank known as the Federal Reserve System (also known as the Federal Reserve or “The Fed”). It comprises 12 regional districts located throughout the country. Each district is responsible for regulating monetary policy set by the Federal Reserve System and the commercial banks within its own district. In addition, these 12 districts provide financial services to the U.S. government and to U.S. banking institutions.

Financial Services Slide 3

Key Points: - The earliest evidence of financial institutions began in 19th-century England as cooperatives. - Friedrich Raiffeisen took the cooperative notion one step further by establishing the Heddesorf Credit Union. Its purpose was to provide financial assistance to farmers to purchase cattle, farming machinery, and seeds to plant crops. This was the first financial cooperative designed to meet the credit needs of a specific group. - St. Mary’s Cooperative Credit Union opened in Manchester, N.H., in 1909. This was the first official credit union established in the United States. - Edward Filene (a merchant) and Pierre Jay (the Massachusetts Banking Commissioner) united efforts that same year to enact the Massachusetts Credit Union Act of 1909. This law served as the template for many states’ credit union laws and provided the foundation for the Federal Credit Union Act of 1934. - The Credit Union National Extension Bureau was also established to encourage the development of credit unions throughout the U.S.; by 1930, there were 1,100 in existence. - The Federal Credit Union Act was signed into law by President Franklin Delano Roosevelt in 1934, which established a national system for setting up and regulating credit unions in the United States. The goals of the agency were to offer credit and promote savings through a non-profit, cooperative means. - The National Credit Union Share Insurance Fund (NCUSIF) was created in 1970 (without the use of tax dollars) to guarantee member deposits in credit unions similar to the Federal Depositary Insurance Corporation (FDIC).

Teacher Tips: - Engagement – Ask the students to brainstorm specific groups of people that would large enough to support a credit union. - Check for Understanding – Determine if the students understand the notion that credit unions meet the needs of a specific group of people.

Teacher Reflection:

Financial Services

The banking system in the United States has evolved for more than 200 years. This industry has moved from a decentralized, unregulated system to a highly controlled system. For many years, banking and financial service companies competed amongst themselves with little or no competition. All of this changed when non-bank financial institutions entered the market. They offered similar services and products as banks in addition to interest- bearing saving accounts.

Today, there are a wide range of financial institutions that compete for your business. As of 2007, the American Bankers Association – Banking Today, indicated there were 8,778 banks; 9,014 credit unions; 7,987 insurance companies; 7,713 mortgage and finance companies; and 7,483 investment and security brokerages.

History of credit unions

The earliest evidence of financial institutions began in 19th century England as cooperatives. The idea took hold when Herman Schulze-Delitzsch created the “people’s bank” in Germany in 1850. His counterpart, Friedrich Raiffeisen, took the cooperative notion one step further by establishing the Heddesorf Credit Union. Its purpose was to provide financial assistance to farmers to purchase cattle, farming machinery, and seeds to plant crops. This was the first financial cooperative designed to meet the credit needs of a specific group. This enterprise provided an early blueprint for future credit unions in the United States.

Financial Services

Significant events occurred in the decades that followed.

Two credit unions were developed by Alphonse Desjardins: The first, La Caisse Populaire de Levis, was organized in 1900 in Canada to counteract the high interest rates charged to working families by loan sharks.

The second, known as St. Mary’s Cooperative Credit Union, opened in Manchester, N.H., in 1909. This was the first official credit union established in the United States. Edward Filene (a merchant) and Pierre Jay (the Massachusetts Banking Commissioner) united efforts that same year to enact the Massachusetts Credit Union Act of 1909. This law served as the template for many states’ credit union laws and provided the foundation for the Federal Credit Union Act of 1934.

Credit unions proved popular, as the availability of credit was limited by banks and other financial institutions. In the 1920’s, the demand for cars and household appliances surged; credit unions took the opportunity to expand their membership by offering a source of credit. The Credit Union National Extension Bureau was also established to encourage the development of credit unions throughout the U.S.; by 1930, there were 1,100 in existence.

The Federal Credit Union Act was signed into law by President Franklin Delano Roosevelt in 1934, which established a national system for setting up and regulating credit unions in the United States. The goals of the agency were to offer credit and promote savings through a non- profit, cooperative means. The number of credit unions grew steadily, and by 1960, membership had grown to more than six million members and 10,000 federal credit unions.

In the 1970’s, expanded services were introduced including home loans and other types of savings accounts to compete with other financial institutions. In addition, the National Credit Union Share Insurance Fund (NCUSIF) was created in 1970 (without the use of tax dollars) to guarantee member deposits similar to the Federal Depositary Insurance Corporation (FDIC). The number of memberships and assets in credit unions grew significantly during this time.

Restructuring occurred in the 1980’s due to the poor national economy. Severe unemployment and business failures created an uncertain environment. Members became fearful of losing their deposits. In 1985, federally-funded credit unions decided to fund the

Financial Services Slides 3 (Continued) and 4

Key Points: - Restructuring occurred in the 1980s due to the poor national economy. - In 1985, the federally-funded credit unions decided to fund the NCUSIF, and Congress agreed to protect and insure member deposits, thus, establishing confidence with its members once again. - In 2008-2009, the U.S. financial system suffered another crisis. A number of credit unions failed. In response, the NCUA proactively set up a yearly review system, whereby problems in individual federal credit unions can be detected early before becoming catastrophic. - More than 96% of credit unions met the funding requirements required by law by the end of 2009. Because of the ongoing partnership between the Credit Union system and the U.S. government today, credit unions continue to grow and remain strong. - Poverty, lack of growth, and income distribution are major problems worldwide. The benefits of a cooperative financial system are recognized worldwide, and access to this system (particularly in developing countries) is seen as a viable solution. - The concept of financial inclusion, which allows individuals and organizations the opportunity to set up businesses and save for the future while providing protection from risk, is difficult. - Multiple barriers to financial inclusion include but are not limited to: (1) the “unbankable,” including those with no income or who are considered high risk; (2) cash-only users, known in the financial world as non-users; (3) cultural and religious factors; (4) excluded groups, including women and those living in poverty; (5) lack of competition; (5) regulatory conflicts; (6) absence of financial services in rural areas; and (7) a lack of financial literacy education.

Teacher Tips: - Engagement – Ask the students to think of countries that have barriers or limited access to financial institutions. - Check for Understanding – Determine if the students’ answers to the engagement activity are accurate.

Teacher Reflection:

Financial Services

NCUSIF, and Congress agreed to protect and insure member deposits, thus, establishing confidence with its members once again.

In 2008-2009, the U.S. financial system suffered another crisis. According to the NCUA, “the resulting cascade of job losses, bankruptcies, and home foreclosures exerted pressure on the entire American financial services sector—including credit unions.” As a result, a number of credit unions failed. In response, the NCUA proactively set up a yearly review system whereby, problems in individual federal credit unions can be detected early before becoming catastrophic. More than 96% of credit unions met the funding requirements required by law by the end of 2009. Because of the ongoing partnership between the credit union system and the U.S. government today, credit unions continue to grow and remain strong.

Reference: A Brief History of Credit Unions http://www.ncua.gov/about/History/Pages/History.aspx

International efforts

Poverty, lack of growth, and income distribution are major problems worldwide. The benefits of a cooperative financial system are recognized worldwide, and access to this system (particularly in developing countries) is seen as a viable solution. The concept of financial inclusion, which allows individuals and organizations the opportunity to set up businesses and save for the future while at the same time providing protection from risk, is difficult. There are many barriers to financial access internationally and until recently, data collection has been limited.

Multiple barriers to financial inclusion include but are not limited to: (1) the unbankable, including those with no income or who are considered high risk; (2) cash-only users, known in the financial world as non-users; (3) cultural and religious factors; (4) excluded groups, including women and those living in poverty; (5) lack of competition; (5) regulatory conflicts; (6) absence of financial services in rural areas; (7) a lack of financial literacy education.

Efforts are being made, however, to target problem areas by: (1) reducing costs and red tape; (2) improving identification requirements; and (3) respecting cultural differences when designing product features; and (4) dealing with repayment issues. In addition, simplified processes are being put into place to open accounts and make deposits.

Financial Services Slide 4 (Continued)

Key Points: - Efforts are being made, however, to target problem areas (such as loans) by: (1) reducing costs and red tape; (2) improving identification requirements; and (3) respecting cultural differences when designing product features; and (4) dealing with repayment issues. - Simplified processes are also being put into place to open accounts and make deposits. The World Council of Credit Unions (WOCCU) is well known for establishing access to financial services through a savings-based approach to clients in poor countries.

Teacher Tips: - Engagement – Have the students complete the activity in the Student Guide. - Check for Understanding – Determine if the students’ thoughts appear to be accurate from the activity in the Student Guide.

Teacher Reflection:

Financial Services

The World Council of Credit Unions (WOCCU) is well known for establishing access to financial services through a savings-based approach to clients in poor countries. They work closely with policy makers, government officials, and credit union leaders; currently, they have assisted in more than 275 projects in 71 countries.

More data is being collected about the access, availability, and success of financial services across the globe. The Financial Access Survey provides country-by-country banking access data through 2013, detailed at http://www.imf.org/external/np/sec/pr/2014/pr14425.htm.

The Global Financial Inclusion (Findex) Database (funded by the Bill and Melinda Gates Foundation) uses 140 indicators to measure how people around the world handle their finances. The number of people worldwide with an account grew by 700 million between 2011 and 2014. Sixty-two percent of the world’s adult population has an account, up from 51 percent in 2011. In 2011, 2.5 billion adults were unbanked. (http://www.worldbank.org/en/programs/globalfindex)

References:

Global Financial Inclusion (Global Findex) Database: http://www.worldbank.org/globalfindex.

World Council (WOCCU)-Core capabilities: http://www.woccu.org/financial inclusion/core

Global Financial Development Report: http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTGLOBALFINREPORT/0,,contentMDK:2 3268789~pagePK:64168182~piPK:64168060~theSitePK:8816097,00.html

Write a 5-sentence paragraph explaining your thoughts on how limited access to financial institutions in developing countries impacts individuals and society as a whole. You may conduct an Internet search to gather information and statistics to support your thoughts.

Financial Services Slides 5 — 7

Vocabulary: - Banks — are publicly or privately-owned corporations and chartered by the state and federal government. Banks allow deposits, make loans, and are commercial in nature, meaning operate as for-profit entities. - Credit Unions — offer financial services to members who share a common bond, such as teachers or federal employees. Credit unions offer a wide range of services similar to banks. Usually their products and services are offered at a lower cost than banks. They are non-profit in nature; all profits are kept in the organization and benefit the members with lower costs.

Key Points: - Key reasons to use a financial institution: o They are insured and provide safety for your money by guaranteeing funds to a certain amount. o They are convenient, and with today’s electronic capabilities, you may withdraw funds, pay bills, make deposits, and transfer money without having to step into a building. o Your money remains secure. Financial institutions use security systems, such as video surveillance cameras, to prevent theft. o Financial institutions can help you plan what to do with your money. - Types of financial institutions include: banks, credit unions, trust companies, and savings and loan associations; also cash advance, pawn shops, payday loan, auto title loan, and check- cashing service companies.

Teacher Tips: - Engagement – Ask students to brainstorm reasons to use a financial institution. - Check for Understanding – Ask students to describe the difference between a credit union and a bank.

Large Group Discussion: - Ask the students which types of financial institutions they think are the most popular.

Teacher Reflection:

Financial Services

Why use a financial institution?

Financial institutions provide many services to help you manage your money and finances. Four reasons to use a financial institution include: (1) They are insured and provide safety for your money by guaranteeing funds to a certain amount. (2) They are convenient, and with today’s electronic capabilities, you may withdraw funds, pay bills, make deposits, and transfer money without having to step into a building. (3) Your money remains secure. Financial institutions use security systems, such as video surveillance cameras, to prevent theft. (4) Financial institutions can help you plan what to do with your money. Financial advisors are available to determine how to best invest your money.

Types of financial institutions

There are many types of financial institutions to service your money needs. Banks and credit unions offer many services to save, invest, pay bills, and obtain loans for homes and cars. Insurance companies may offer loans and provide coverage to protect individuals from being sued or someone taking your hard-earned assets. Other financial institutions, such as cash advance and pawn shops, provide check cashing services, payday loans, and auto title loans (refer to Topic 16, Predatory Lending, for additional information). Consumers should be leery, however, of the high cost of doing business with them. Working with credit unions and banks is preferable, as they provide many needed services and charge reasonable rates for their services.

Banks and credit unions

Banks and credit unions offer many of the best services and fees to handle your money; however, there are differences between the two. Banks are publicly or privately-owned corporations and chartered by the state and federal government. Banks provide a place to make deposits, offer loans, and are commercial in nature; they make loans to businesses and individuals. Banks also operate as for-profit entities, signifying that profits are paid to executives, employees, and the stockholders of record.

Credit unions, on the other hand, offer financial services to members who share a common bond, such as teachers or federal employees. Credit unions offer a wide range of services similar to banks. Usually their products and services are offered at a lower cost than banks. They are non-profit in nature; all profits are kept in the organization and benefit the members with lower–cost products.

Financial Services Slides 8 — 9

Vocabulary: - Checking account – an account used to handle most financial transactions. Money is easily deposited, withdrawn, or transferred to other accounts. - Savings account – an account used to deposit money and save for later use. - Money Market Account – similar to a savings account; it pays a higher interest rate on your balance. Normally, a higher minimum balance is required to avoid a penalty. - Certificate of Deposit (CD) — an account where money must be kept in the account for a specified amount of time (anywhere from 90 days to 10 years) in order to pay a fixed interest rate. If money is withdrawn prior to the account maturing (ending), a penalty is charged. - Stock — a certificate of ownership for a company. - Bond — an investment made by lending money to a governmental agency or company. - Mutual fund — an investment made by purchasing stocks and bonds in different companies. Your money is diversified, thus spreading the risk across many companies rather than relying on one company to perform well.

Key Points: - Deposit accounts have various restrictions that vary within financial institutions. - Minimum balances and the volume of transactions may involve a fee. - Non-deposit accounts will be talked about more in detail in the Investing and Saving topic.

Teacher Tips: - Engagement – Ask the students to share with the class what kind of account(s) they have with a financial institution. - Check for Understanding – Ask the students to share some of the requirements that they have affiliated with their account. - Ask the students if they know about any of the non-deposit accounts.

Teacher Reflection:

Financial Services

Deposit accounts

A checking account is used by most people to handle most financial transactions. Money is easily deposited, withdrawn, or transferred to other accounts. Personal checks can be used to pay bills instead of cash, and many banks offer online, electronic bill-pay services. This type of account may or may not have minimum balance requirements and may or may not be interest bearing. In addition, some financial institutions charge a fee for each check written.

A savings account is the simplest type of deposit account. It is easily accessible, provides a safe place to keep your money, and pays interest on the balance. Like checking accounts, there may be fees assessed if the balance falls below a minimum amount. Money may be deposited or withdrawn at your convenience; most savings accounts include debit card access. This allows cash to be withdrawn from ATM machines anywhere.

A money market account normally pays a higher interest rate than a savings account. Normally, a higher minimum balance is required.

A Certificate of Deposit (CD) is an account where money must be kept in the account for a specified amount of time (anywhere from 91 days to 10 years) in order to earn a fixed interest rate. If money is withdrawn prior to the account maturing (ending), a penalty will be charged.

Non-deposit accounts

A stock is a certificate of ownership for a company. You may purchase as much stock as you can afford in a company. Money is made in stocks by buying low and selling high. You can also make money when a company declares dividends to its stockholders. When this occurs, the company takes profits and distributes them to the stockholders.

A bond is an investment made by lending money to a governmental agency or company. In essence, a bond is like an IOU. The agency or company you are lending to promises to pay interest during the life (time) of the bond and repay the entire face value (the amount you lent) when the bond comes due (reaches maturity).

A mutual fund is an investment made by purchasing stocks and bonds in different companies. Your money is diversified, spreading the risk across many companies rather than relying on one company to perform well. Mutual funds do have varying degrees of risk, so it is important to educate yourself

Financial Services Slides 10 — 11

Vocabulary: - Auto Loan – borrowed money to purchase an automobile. - Home Loan – borrowed money to purchase a home. - Mortgage – a home loan. - Business Loan – borrowed money to open a business. - Direct Deposit – an electronic way of putting money into an account at your financial institution. - Online Mobile Banking – an electronic way of processing financial transactions. - Money Order – a request for prepaid money from your bank or credit union account. - Cashier’s check – offered only by financial institutions; they are drawn from your account and signed by a bank or credit union representative. - Safety Deposit Box – a box at your financial institution that allows you to store important financial information, documents, and valuables.

Key Points: - Shop around to get the best deals on loans. - Setting up your financial life electronically can save you lots of time and convenience. - Consider paying all your bills electronically and having your paychecks directly deposited to your money accounts.

Teacher Tips: - Engagement – Ask the students if they process any of their financial transactions electronically. - Check for Understanding – Ask the students why it is a good idea to organize their financial lives electronically. Is it safe to do so?

Teacher Reflection:

Financial Services

about where your money is invested. A factor to consider is that these funds have management fees associated with owning them.

Loans

An auto loan is applied for when money is borrowed to purchase an automobile. The amount of interest paid for borrowing the money will vary based on your credit score and other factors. Pay-off requirements on this type of loan are usually between three to seven years.

A home loan is referred to as a mortgage. When you buy your first home, you will undoubtedly have to borrow money with loans varying in duration from 15-30 years. You will be required to prove your income and a consistent work history to be approved for this type of loan. The interest rate varies, but in part is based on the interest rates set by the Federal Reserve.

A business loan is a loan obtained to open a business. This type of loan normally requires some form of collateral (usually cash or securities), as well as submission of a business plan indicating projected revenue and expenses. A higher interest rate is often attached to this type of loan due to risk factors.

Additional services

As mentioned earlier, there are many types of services that financial institutions offer. Direct deposit allows the deposit of money electronically without having to be physically present at a credit union or bank. For example, most employees have their paychecks directly deposited to a checking or savings account by their employer each pay day. Online mobile banking allows the convenience of electronic bill-pay services and money transfers within accounts. For example, if your checking account has a low balance, money can be transferred online from your savings account to your checking account using your phone or computer.

There are times you may be required to make payment with a money order or a cashier’s check, rather than a personal check. A money order is a request for prepaid money from your bank or credit union account. It may be purchased at grocery and convenience stores and other retail outlets. A money order is issued for a limited amount, such as $500 or $1,000, depending upon the issuer. A cashier’s check is offered only by financial institutions, is drawn from your account, and signed by a bank or credit union representative. Higher maximum limits apply, but the fees for cashier’s checks

Financial Services Slides 12 — 18

Vocabulary: - Automated Teller Machine (ATM) – a device that allows you to electronically withdraw and deposit money with the use of a debit card.

Key Points: - Shop around to locate an organization that you feel will help you manage your money the best. - Financial institutions require that you open a checking and or savings account before you can use their other financial services. - Keep in mind there might be fees associated with the balance and maintenance of your accounts. - A checking account allows you to manage your finances by tracking transactions and checking balances as frequently as you’d like. - Usually after opening a checking account, the financial institution will provide an Automated Teller Machine (ATM) card (or debit card), which allows the electronic withdrawal of money from almost anywhere. In addition, a checkbook and register will be provided to write checks and track deposits and withdrawals.

Teacher Tips: - Engagement – Ask the students if they have ever written a check. If they have, ask how often. - Check for Understanding – Ask the students why they think it might be a good idea to have a checking account.

Teacher Reflection:

Financial Services

are generally more expensive. Lastly, most financial institutions offer safety deposit boxes for storing important financial information and documents as well as valuables. There is a yearly fee for safety deposit box rental which varies dependent upon the size.

Opening and maintaining an account

Many financial institutions compete for business and offer promotions and enticements to get your business. Shop around to locate an organization that you feel will help you manage your money the best.

Most places require that you open a checking and or savings account before you can use their other financial services. Your newly-opened account will allow you to begin making deposits and withdrawals immediately. In addition, the sooner you open an account, the sooner you earn interest on your money. Keep in mind that there might be fees associated with the balance and maintenance of your accounts.

Lastly, it is important to track every transaction and be diligent in recording the amount of deposits and withdrawals from your account. Always check your balances on a regular basis and record the interest and fees earned or charged to your account. You will receive a monthly statement showing everything that occurs within your account. It is wise to reconcile (verify that all transactions and balances are correct) your accounts every month.

Checking account

As mentioned earlier, checking accounts offer many benefits. The convenience of writing checks or making electronic payments allows you to save time by not having to hand-deliver payments to creditors. A checking account allows management of your finances by tracking transactions and checking balances daily, if necessary.

In addition, there is security in knowing that your money is insured and there are safety protocols in place to protect your money. Usually after opening a checking account, a financial institution will provide an Automated Teller Machine (ATM) card (or debit card) which allows the electronic withdrawal of money from almost anywhere. In addition, a checkbook and register will be provided to write checks and track deposits and withdrawals.

Financial Services Slides 13 – 18 (Continued)

Vocabulary: - Payee – the recipient of a check. - Routing Number – a nine-digit number that identifies your financial institution. - Account Number – the number that identifies you as the owner of an account.

Key Points: - Checks have several components that should be studied and understood. - The written amount on a check takes precedence over the number amount. - The routing number is located on the lower, left-hand corner of the check, followed by your account number. - Checks must be dated and signed.

Teacher Reflection:

Financial Services

Understanding the components of a check is important. The check below contains the required components:

# Component 1 Date the check is written. 2 Depositor – the person to whom the bank account belongs. It includes the person’s address and sometimes their phone number. 3 Pay to the Order of – this is the payee or the recipient of the check. The payee does not have to be a business or person. Checks can be made payable to “cash” or “bearer” which allows funds to be paid to the person or organization that presents the check for payment. 4 Your signature goes here. 5 Amount of the check. 6 Written amount of the check. 7 Check number (located in two places). 8 Banking information. 9 The first set of numbers is the routing number of your bank. It is nine numbers and identifies the financial institution’s branch where your account is located. Entities need this number when you pay or deposit funds electronically. The second set of digits is your account number. Usually when you

Financial Services Slides 13 – 18 (Continued)

Vocabulary: - Check Register – a device that allows you to electronically withdraw and deposit money with the use of a debit card. - Endorse – signing the back of a check so that it can be converted to cash.

Teacher Tips: - Engagement – Have the students complete the activity in the Student Guide: Writing a Check and Recording it in a Check Register. - Check for Understanding – Check the students’ work for accuracy.

Teacher Reflection:

Financial Services

When writing a check, include the name of the person or company (the payee) along with the dollar amount. In addition, you must write out the check amount, as this is what the financial institution will go by when drawing the money from your account. Lastly, always make sure to date and sign the check.

Fill out the check below with the information that follows:

You are writing a check to your landlord for this month’s rent. The rent is $475. The date is August 1 of the current year. Your landlord’s name is Vern Thomas.

In the check register below, record the above transaction.

*Hint: You paid your landlord, so record the amount in the Payment/Debit column.

CHECK REGISTER

Check Date Transaction Description  Balance Number Payment/ Debit Deposit/ Credit (-) (+) 1025 Monthly Rent 475.00 1,200.00

725.00

Financial Services Slides 13 – 18 (Continued) and 19 — 24

Vocabulary: - Deposit – putting money into an account.

Key Points: - Your endorsement allows a check to be cashed. - Emphasize: “every time you encounter a money transaction, it should be recorded in a check register or ledger."

Teacher Tips: - Engagement – Ask the students how often they deposit money into their savings accounts. - Check for Understanding – Ask the students the process they use to deposit money into their accounts.

Teacher Reflection:

Financial Services

There are many requirements you should be aware of when dealing with checks (deposits and withdrawals). For example, when cashing a check, it is required that you endorse (sign) the check on the back where indicated. (Your signature must be written exactly as the name spelled on the front of the check). Your endorsement indicates that the check can be converted to cash and/or deposited into any of your accounts. Most financial institutions also require the account number to be written below your endorsed signature.

Sign your name on the back of the check where it says “Endorse Here.” As mentioned above, you should write your account number below your signature.

Deposits

When you place money into your checking or savings account, this is known as making a deposit. As discussed previously, when you deposit a check (made out to you), endorse the check on the back. This can occur without having to physically go to your financial institution. Checks can be deposited into your account via an ATM machine, your phone, or by electronic transfer. Currently, most people have their paychecks from work directly deposited electronically into their bank account; thus, never having to physically touch the check. In addition, income taxes and student loan disbursements can be directly deposited.

Financial Services Slides 19-24 (Continued)

Vocabulary: - Deposit Slip – a form to record the money going into an account.

Key Points: - Some financial institutions still require deposit slips to be filled out when making a deposit. - Review the various parts of a deposit slip.

Teacher Tips: - Engagement – Ask the students to complete the activity in the Student Guide: Making a Deposit and Recording the Transaction in the Check Register. - Check for Understanding – Check the students’ work for accuracy.

Teacher Reflection:

Financial Services

If you decide to deposit a check(s) in person, you may have to fill out a deposit slip (especially if there are multiple checks). This procedure will vary based on the financial institution.

Below are two different examples of deposit slips for placing money in a checking or savings account. Note that the payee has the option to receive a partial or full payment in cash.

Financial Services Slides 25 — 27

Vocabulary: - Debit Card – a card that allows you to withdraw, deposit, and make payments without cash. - Overdraft Fee – a fee charged by your financial institution when your account balance goes below your required balance. - Debit – cash is withdrawn immediately from your account. - Credit – it takes two to three business days before cash is withdrawn.

Key Points: - Automated Teller Machine (ATM) cards and debit cards are just like cash. - These cards can be used anywhere Visa or MasterCard are accepted. - If you misplace or lose them, notify your financial institution immediately so you are not responsible for unauthorized purchases made by someone other than yourself. - Your debit or ATM card has a Personal Identification Number (PIN) associated with it. - It is important to not share this number with anyone. Each time you make a transaction with this card, you will need to enter the PIN.

Teacher Tips: - Engagement – Ask the students if they have a debit card. - Check for Understanding – Ask the students if they know the difference between using their debit vs. a credit card.

Large Group Discussion: - Ask the class if they know what to do if they lose their debit card.

Teacher Reflection:

Financial Services

Using the check register and the deposit slip below, record the following transactions and fill out the deposit slip. The date is August 1, 20XX. Your account number is 123456789.

1. Received $100 for your birthday. You will deposit it into your savings account.

2. You received a tax refund check of $400 from the Internal Revenue Service. You will deposit it into your savings account.

CHECK REGISTER

Check Date Transaction Description  Balance Number Payment/ Debit Deposit/ Credit (-) (+) N/A 8-1 Cash-Birthday Gift +100.00 850.00

950.00 N/A 8-1 Tax Refund +400.00 1350.00

Deposit Slip Date: 8-1-20XX 100 00 Cash

Name: Student’s First and Last Name Checks 400 00 Account Number: 123456789

Subtotal 500 00

Nusenda Credit Union Less Cash 0 00

Albuquerque, New Mexico 500 00 Total

Financial Services

ATM and debit cards

Automated Teller Machine (ATM) cards and debit cards act just like cash. You can make purchases and withdraw money with these cards. Of course, you need to make sure you have money in your account if you plan to use a debit card to withdraw cash. These cards can be used anywhere Visa or MasterCard are accepted. It is important to store these cards in a secure place at all times. If you misplace or lose them, notify your financial institution immediately so you are not responsible for unauthorized purchases made by someone else.

Your debit or ATM card has a Personal Identification Number (PIN) associated with it. It is important to not share this number with anyone. Each time you make a transaction with this card, you will need to enter the PIN.

When using a debit card, you have the option of using other debit or credit. If you choose debit, the money will be taken out of your account immediately or within one business day. In addition, you also have the option of receiving cash back. If you choose credit, it takes two to three business days for the money to be withdrawn from your account and a signature may be required on the credit slip (to be retained by the vendor). Lastly, credit transactions do not offer a cash-back option but they do provide added fraud protection.

It is important to record your transactions so you can verify your balances in your accounts. If you use your debit or ATM card at an ATM machine that is not affiliated with your financial institution, you will be charged an additional fee for withdrawing your own money. Also, if you attempt to withdraw money that you don’t have in your account, you will be charged an overdraft fee. Keep in mind that there may be annual fees and minimum balance fees associated with your card.

You used your debit card a couple of times this week. Record the following transactions in the check register on the next page:

1. On August 25, you used your debit card to put gas in your car: $50

2. On August 28, you used your debit card to purchase a $95 required textbook for school.

Financial Services Slides 28 — 30

Key Points: - Today’s technology provides the convenience to process financial transactions from almost anywhere there is Internet access. - You can pay bills, transfer money, and purchase items via your computer or phone. - When using electronic services, be sure to always use secure passwords; change them periodically; and never share this information with anyone. - Each month, your financial institution will provide a statement showing all of the transactions that occurred in your account during the month. - It is important to reconcile this statement with your ledger (or register) to ensure that it matches your records. - Save receipts and record transactions every time you deposit or withdraw money from your account. - Reconcile your account to the statement that you receive from your financial institution every month.

Teacher Tips: - Engagement – Have the students complete the activity in the Student Guide: Recording Debit Card Transactions in a Check Register. - Check for Understanding – Check the students’ work for accuracy.

Teacher Reflection:

Financial Services

CHECK REGISTER

Check Date Transaction Description  Balance Number Payment/ Debit Deposit/ Credit (-) (+) Debit Card 8-25 Put Gas at Phillips -50.00 450.00

400.00 Debit Card 8-1 Textbook Purchase -95.00 305.00

More ways to pay bills

As discussed throughout this section, today’s technology provides the convenience to process financial transactions from almost anywhere there is Internet access. You can pay bills, transfer money, and purchase items via your computer or phone. When using electronic services, be sure to always use secure passwords; change them periodically; and never share that information with anyone.

Your account

Each month, your financial institution will provide a statement showing all of the transactions that occurred in your account during the month. It is important to reconcile this statement with your ledger (or register) to ensure that it matches your records. Some tips to help you manage your accounts: (1) Save receipts and record transactions every time you deposit or withdraw money from your account. (2) Reconcile your account to the statement that you receive from your financial institution every month.

Be consistent with these procedures and manage your money appropriately. This will help you avoid paying late and unnecessary fees.

Financial Services Slide 31

Vocabulary: - Review the terms in the Student Guide.

Key Points: - It is important that you consistently record financial transactions in your check register or ledger. - People who fail to track their finances on a regular basis are often unaware of the amount of money they have available to pay bills. - Reconciling your check register with your monthly bank statement every month will help you manage your money effectively, and you will always be aware of the exact amount in your account.

Teacher Tips: - Engagement – Ask the students if they know what a bank reconciliation is. - Check for Understanding – Ask the students why their check registers should be reconciled to their monthly account statements.

Teacher Reflection:

Financial Services

Reconciling your account

As indicated throughout this topic, it is important that you consistently record financial transactions in your check register or ledger. Establishing this habit will help you manage your money throughout your lifetime. People who fail to track their finances on a regular basis many times are unaware of the amount of money they have available to pay bills. Unintended debt can accumulate because of fees and penalties assessed when you attempt to withdraw or pay bills with money you don’t have.

Reconciling your check register with your monthly bank statement every month will help you manage your money effectively, and you will always be aware of the exact amount in your account.

Outstanding Checks – These are checks you have written and delivered for payment but they have not yet cleared your financial institution; thus, they do not show on your current monthly statement.

Deposits in Transit – These are deposits you have recorded in your check register. They do not show on your monthly statement because they have not been recorded yet by your financial institution.

Service Fees/Charges – These are fees shown on your monthly statement but not recorded in your check register, because you were unaware of the fees until you received your statement.

NSF (Not Sufficient Funds) – This can occur when you deposit a check that you received from someone but when your financial institution attempts to withdraw the money from their account, there’s not enough. Ultimately, your financial institution will withdraw the money from your account. An overdraft (below) also results in an account with insufficient funds.

EFT (Electronic Fee Transfer) – This is a transaction that occurs when money is deposited or paid from your account electronically. Sometimes, people forget about these transfers and fail to record them in their check register.

Overdraft Fees – These fees occur when you attempt to withdraw money from your account and you don’t have enough money to withdraw.

Financial Services Slide 31 (Continued)

Key Points: - Go over the Bank Reconciliation formula in the Student Guide with the students.

Teacher Tips: - Engagement – Have the students complete the Bank Reconciliation in the Student Guide. - Check for Understanding – Check the students’ work for accuracy.

Teacher Reflection:

Financial Services

The goal of reconciling your check register to your monthly statement is to get both balances equal. If they aren’t equal, recheck each entry to see where the error or omission is. The table below provides a formula for reconciliation:

Bank Reconciliation Formula

Check Register Balance Bank Statement Balance

Ending Balance Ending Balance

- NSF + Deposits in transit

- Overdrafts - Outstanding checks

- Service charges = New Balance

± EFT

= New Balance

Below is your Check Register for the month of September.

Check Date Transaction Description  Balance Number Payment/ Debit Deposit/ Credit (-) (+) 53 2-Sep Paid Cell Phone Bill 52.00  850.00

-52.00 N/A 10-Sep Deposited Allowance  100.00 798.00 100.00 Direct Deposit of N/A 15-Sep Paycheck  200.00 898.00 200.00 54 30-Sep Paid for some Clothes 50.00 1,098.00 -50.00 Deposited a check N/A 30-Sep from your mom 200.00 1,048.00 200.00 1,248.00

Financial Services

Below is your monthly statement:

Nusenda Credit Union Account Statement Albuquerque, New Mexico

Your Name Account #: 123456789 Your Address Date: 9-30-20XX

Beginning Total Total Service Ending Balance Deposits Withdrawals Charge Balance

850.00 300.00 152.00 5.00 993.00

Transactions

Deposits Date Amount__

Deposit 9-10-20XX 100.00 Direct Deposit 9-15-20XX 200.00

Charges Date______

Service Charge 9-30-20XX 5.00 NSF 9-30-20XX 100.00

Checks ______

Number Date Amount 53 9-2-20XX 52.00

Financial Services

Step 1: Put a  next to each amount in your check register that shows on your monthly statement.

*Hint: The first three amounts are shown on your monthly statement.

Step 2: Determine what amounts on your monthly statement are not showing in your check register.

*Hint: The last two transactions are not showing on your monthly statement. Thus, you have an outstanding check and a deposit in transit. Also, there are two other amounts not shown in your check register that are shown on your monthly statement.

Step 3: Use the formula below to reconcile the two balances.

Note: Your check register balance should equal your monthly statement balance after you reconcile your account.

Bank Reconciliation Formula

Check Register Balance Bank Statement Balance

Ending Balance 1,248.00 Ending Balance 993.00

-NSF -100.00 +Deposits in Transit +200.00

-Overdrafts 0.00 - Outstanding Checks -50.00

-Service charges -5.00 = New Balance 1,143.00

±EFT 0.00

=New Balance 1,143.00