1. What is it? 2. Why is it important? 3. How do you eat your Halloween candy?

1. What is it?2. Why is it important?3. How do you eat your

Halloween candy?

Write down your expenses for a typical week. Include every expense from gas and lunch to snacks and entertainment. Write down your income as well.

Personal Finance Section 1

SSEPF2a Compare services offered by different financial institutions. SSEPF2c Give examples of the direct relationship between risk and

return.

Today’s topic:Checking Accounts

1. Why do you need a checking account?

What type of Accounts do banks have available?Banks offer a variety of accounts for

customersA checking account allows customers to write

checks against amounts they hold in the bank They can also utilize ATM

servicesSavings—allows customers

to amass funds for the future as long as they keep a minimum “balance” in the account

Financial InstitutionsBanks are a type of institution licensed

to provide financial servicesThey hold, borrow, loan, invest and even

create moneyFor customers they offer a variety of

services through personal bank accounts like transfers, automated telling, checking, savings or lines of credit, loans

The amounts of money customers put into the bank are called deposits

Reserves are the cash banks keep for withdrawalsRemember the FED sets the amount they have to

keep

Financial InstitutionsBanks come in many different

forms depending on what servicesthey offer

Commercial banks offer the widest variety of services

(Bank of America, Citi, BB&T)Credit unions are usually smaller and are non-

profits owned by their members Some banks specialize in financing (mortgages)

or investing but offer fewer typical services

ServicesBeyond just storing money, banks provide

a myriad of services for customers with accounts

Online banking and bill payment allow customers to personally monitor and manage their finances

Free checking—some banks offer checking for free, which means that many banks DON’TLook for student discounts or minimum balance

deals!Direct Deposit—employers can immediately

deposit an employee check into an account, eliminating paychecks

Safety deposit boxes are small safes where customers can store valuables or documents to protect against theft or damage

RiskRisk vs. Return Risk refers the chance that an investment might

actually end up losing money rather than making it.Return refers to the eventual payoff of the investment.

If you make a certain investment, will you still be OK financially if it fails and you lose what you invested?

If so, then an investor might want to take the risk in hope of a profitable return

the greater the risk, the greater the return

Is gambling worth the risk?

Personal Finance Section 2

SSEPF5a List various types of insurance such as automobile, health, life, disability, and property.

SSEPF5b Explain the costs and benefits associated with different types of insurance; include deductibles, premiums, shared liability, and asset protection.

What is insurance?

InsuranceInsurance is a form of risk

management used to protect buyers from loss or to ensure less financial damage from certain losses

There are plans of insurance for nearly everything: from car, home and dental plans, to computers, jewelrylife insurance pays survivors after

someone’s deathDisability insurance pays someone when

you they injured and can’t workPackages of insurance are called policiesBuyers of policies pay fixed amounts of money to an

insurance company over specific periods of time to “cover” what they have insured from loss

PurveyorsPurveyorsThere is an

enormous variety of companies who sell insurance

How many of these have you seen or heard of?

How does it work?Policy holder has an estimated value of

something that is insured Actual cash value (ACV)

If the loss of or damage to the insured item is covered, or “qualifies”, the

company pays for it to be fixed or replacedDeductible—the amount the customer is

responsible for up front before insurance kicks inAfter that amount of money is paid by you, the

company may pay the restSo if you get sick and it costs $2300 to go to the

hospital and your deductible is $500, you have to pay for your bills up to $500, then the insurance company may pay the rest

Premiums and CostsPremiums—the costs per month or every six months,

like a cell phone billPremiums Deductibles

Theses costs are renegotiated after the term, or time period, of the coverage has ended

Costs can go up or down for a variety of reasonsAuto insurance goes up after tickets or accidentsHealth insurance is more expensive for smokers Very valuable items cost more to insure (a doctor’s

hands)So if someone who pays insurance doesn’t use it (get

sick, wreck a car…), do they get their money back?

Why should you be careful with credit cards?

Personal Finance Section 3

SSEPF4a List factors that affect credit worthiness.SSEPF4b Compare interest rates on loans and credit cards from different institutions.

Create a divided paper to take notes about debit and credit cards.

Debit Cards Credit Cards

Credit or Debit?Automated Teller Machines are

common conveniences which allow customers to draw on their accounts from remote locations across the country or globeOver 800,000 ATMs worldwideFirst ATM introduced in England in 1967

Commonly accessed with a debit, or check, card which acts as an electronic check“debits” or withdrawals money directly from a

banking account to pay for goods or services ATM transactions at “foreign” banks are

subject to fees, sometimes up to $4 per transaction

Credit Cards: Buy now, pay laterA credit card is a deferred form of

payment named after the small plastic card commonly usedIt entitles the user to buy goods

or services on the promise to pay for them at a later date

The card holder is issued a “line of credit” or a limited amount of available money for use that the holder does not actually, currently possessBanks or other financial institutions issue these

services

Security and RiskDebit cards can be easily lost or stolenPIN protects outside useDebit cards can “overdraft”, or withdraw

more money than is availableChecks can “bounce” if they are written for

amounts over what is available in an accountBouncing and overdrafting are resolved by

the bank and customers are charged fees

Some FactsUS consumers hold over 600 million credit cardsAverage credit card debt carried by a household

is over $15,000 Average cardholder has at least 3 cardsThe average undergraduate college student has

over $2000 in credit card debt and leaves college with $12000 in student loans

Companies collect nearly $22b in fees every yearThe average interest rate is nearly 13%

Statistics found on creditcard.com (http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php)

Credit & DebtCredit cards allow their holders

to “revolve” their balances, or amounts owedYou don’t have pay each month

BUT you are charged interest per period (month) that you don’t pay

So you owe the amount you have spent PLUS a % of that amount for every period you don’t pay what you owe

The longer you wait the more interest you payThe amount of money you owe is referred to

as your debt

Credit & DebtThe word comes from the Old French

dette and ultimately Latin debere (to owe)

Debt can come from credit cards, loans, or even car and house paymentsDebt stays with a person, so moving,

opening a new account or getting another credit card does not eliminate it

The amount of debt you have can affect your credit score, or the numerical expression of how worthy of credit you are

Personal Finance Section 4

SSEPF2b Explain reasons for the spread between interest charged and interest earned.

SSEPF4c Explain the difference between simple and compound interest rates.

Interested?Interest is a fee paid on borrowed

assets, or the price of borrowed money

Simple Interest is only paid on the principal, or initial amount (I=prt)

Compound Interest is paid on the amounts that accumulate per given periodA loan, for example, may have its interest

compounded every month: in this case, a loan with $100 initial principal and 1% interest per month would have a balance of $101 at the end of the first month, $102.01 at the end of the second month, and so on

Personal Finance Section 4

SSEPF1b Use a rational decision making model to select one option over another.

SSEPF1c Create a savings or financial investment plan for a future goal.

SSEPF2d Evaluate a variety of savings and investment options; include stocks, bonds, and mutual funds.

Warmup1.Why would insurance

companies charge higher rates for accidents or tickets?

Warmup1.What is the relationship

between risk and return?

RiskRisk vs. Return Risk refers the chance that an investment might

actually end up losing money rather than making it.Return refers to the eventual payoff of the investment.

If you make a certain investment, will you still be OK financially if it fails and you lose what you invested?

If so, then an investor might want to take the risk in hope of a profitable return

the greater the risk, the greater the return

Is gambling worth the risk?

InvestingInvesting generally refers to

the use of resources or assets to earn income or profit in

the futureThere are many vehicles, or

instruments, for investment such as property, stocks or bonds, savings or other accounts and assetsInvesting happens over the short term: to buy and

sell quickly perhaps in hours or just days, or over the long term: for many years watching for growth

Investors look for “return” or the ratio of money gained to lost when searching for or evaluating opportunities

http://www.youtube.com/watch?v=VSg22ewWGks&feature=related

http://www.youtube.com/watch?v=VSg22ewWGks&feature=related

Terms of InvestingAnything tangible or intangible that one

possesses, usually considered as applicable to the payment of one's debts

is considered an asset A mutual fund is a professionally managed

investment scheme that pools money and invests it

A bond is a formal contract to repay borrowed money with interest at fixed intervals

market liquidity is an asset's ability to be sold without changing the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset

a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment

Cash cow

TradingStock is traded on a number of

financial markets located in the world’s largest cities NY, London, Tokyo

Indexes of stock prices are commonly kept such as the S & P 500 or the Dow Jones Industrial Average

In NY the NYSE is located on Wall Street along with the largest banking and financing houses which process many of the transactions

http://www.investopedia.com/university/stocks/stocks6.asp

PhilosophyPeter Lynch, a financial

analyst for Fidelity, promoted a strategy of investing: Go with what you know

Lynch said “During a lifetime of buying cars or cameras, you develop a sense of what’s good, what’s bad, what sells, and what doesn’t…and…you know it before Wall Street.”