MoneyMoneyWho needs it?Who needs it?

Definition of Money

Anything that people accept as a standard form

of payment.

Characteristics of Money1. It must be scarce.

The less there is of something, the more valuable it becomes!

1. It must be accepted.People must believe that it has value, and will have value later, no matter what happens.

1. It must be divisible.Can you make change?

Characteristics of Money4. It must be portable

Easily carried

4. It must be durable.Long-lasting

Functions of Money1. Medium of Exchange

Money is an alternative to Bartering

1. Standard of ValueMoney makes it possible to place value on an object.

1. Store of ValueMoney holds it’s value over time, and can be stored or saved.

Learning Goal

To be able to compare various financial

institutions and the services they offer.

3 Main Functions of Banks1. Storing Money – Bank Accounts

Deposit: Putting money into an accountWithdrawal: Taking money out of an account

3 Main Functions of Banks1. Storing Money – Bank Accounts

Checking Account – Storing money short term so you can use it often.

Advantage – Easy AccessDisadvantage – Costs money (Sometimes)

Savings Account – Storing money long term

Advantage – Earn InterestDisadvantage – Limited Access

3 Main Functions of Banks2. Transferring Money

Cashing ChecksTaking money from your account and giving you cash.

Depositing ChecksTaking money from one account and transferring it to another.

Electronic Funds Transfer (EFT)No paper – Money automatically transferred between accounts

Example: Your paycheck is Direct Deposit

3 Main Functions of Banks3. Lending Money

For any loan you must put down “Collateral”For any loan, you must pay “Interest”

The bank uses that money to pay the interest to savings account customers.

3 Main Functions of Banks3. Lending Money

Types of Loans:Mortgage Loan: Loan made to purchase real estateCommercial Loan: Loan made to a business to buy supplies and equipment

3 Main Functions of Banks3. Lending Money

Types of Loans:Line of Credit: An amount of money set aside for preferred customers that is available at any time.Individual Loan: Loan made to an individual to pay for personal items like car repairs or vacations.

Types of BanksCommercial Banks

“Full-Service Banks”Operate to make a profit by charging interest

Savings & Loan Associations Originally ran by Government.

Types of BanksCredit Unions

Non-Profit Bank for Organizations

Brokerage FirmsNOT a BankProvides Investing Advice and Products

Bank ServicesChecking & Savings AccountsMoney Market AccountsCertificates of DepositLoansMortgagesSafe Deposit Boxes

Learning Goal

To be able to identify the major functions of The

Federal Reserve System.

Federal Reserve SystemAKA: “The Fed”

The central banking organization in the USSet-up by Congress to end financial panicsIncludes:

12 Federal Reserve District Banks25 Branch Banks5,000 Member BanksRun by a board of Directors

•12 District Banks

• 25 Branch Banks

Federal Reserve SystemThe 6 Functions of The Fed:

1. Clearing Checks2. Acting as the Federal Government’s

Fiscal Agent3. Supervising Member Banks

4. Regulating the money supply5. Setting reserve requirements6. Supplying paper currency

Federal Reserve System

F.D.I.C.Federal Deposit Insurance Corporation

Federal government agency that protects bank accounts and guards against bank panicsEach account is insured up to $250,000.00