Money and Financial Institutions

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Money and Financial Institutions
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• Make a list of the things you have bought in the
  last week.
• If money didnt exist, how would you pay for them?

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The History of Money

• Monetary system- A system in which goods and
  services are exchanged indirectly using money as
  a medium
• Money- can be anything that people accept as a
  standard for payment

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Functions of Money

• Money has 3 basic functions
• Medium of exchange -
• Standard of Value- a fixed means for measuring
  the weight, amount, or value for something
• Store of Value- it holds its value over time and
  can be stored or saved

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Characteristics of Money

• Money must be stable
• To be used as money, it must be scarce
• Money must be accepted
• Money must be divisible into parts
• Money has to be portable and durable

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Would these items be acceptable as money?
Item Function Function Function
Item Durability Portability Divisibility
Hammer
Hamburger
Bushel of Oats
Rocks found on the ground
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Banking

• Financial Institution- An organization for
  managing money, such as a bank, credit union, or
  brokerage firm
• Banks manage money, move it around, and maintain
  a supply of it as well as keeping money safe and
  gives you access where ever you go

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Storing Money

• Bank account- a record of how much money a
  customer has put in to or taken out of a bank
• Deposit- money put in a bank
• Withdrawal- money taken out of a bank

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Storing Money

• 2 main types of accounts
• Checking accounts- used for saving money in the
  short term
• Savings accounts- usually used for storing money
  over a long period of time
• Interest-rate a bank pays you for keeping your
  money there

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Transferring Money

• Every single business transaction involves the
  transfer of money
• Electronic funds transfer- the transfer of money
  from one account to another using computers
• Used to pay employees, pay bills, withdraw money

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Lending Money

• The money you deposit in a bank makes it possible
  for the bank to lend money to other customers
• Collateral- something valuable you put up for a
  loan, so the bank can take it if you fail to pay
  back the loan.

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Lending Money

• Mortgage loan- used to buy real estate, such as
  a house
• Mortgage-a deed to give the lender back the
  property if the loan is not paid back
• Commercial loan- loan made to businesses to buy
  supplies and equipment

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Lending Money

• Individual Loan- a loan made to an individual to
  pay for personal items, such as a car, home
  repairs, or a vacation.
• Line of Credit- an amount set aside by a bank
  for preferred customers that is available on
  demand.

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Other Financial Services
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Types of banks

• Banks operate on a state, national, and
  international level
• There are strict rules for starting a bank
• Meet special requirements
• Apply for a charter
• Prove you have enough capital

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Commercial Banks

• Most US banks are commercial banks
• Offer the entire range of services
• Often called full-service banks
• In business to make a profit

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Savings and Loan Associations

• Originally set up to offer savings accounts and
  home mortgage loans
• Purpose was to encourage people to save money
  and make it easier to buy a home
• Charged lower interest on loans, paid higher
  interest on savings

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Savings and Loan Associations

• In the 1980s, about 20 of S and Ls failed
• Government passed regulations allowing them to
  charge higher interest rates and offer more
  services
• Most S and Ls are like commercial banks

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Credit Unions

• Nonprofit banks set up by organizations for
  their members to use
• Companies, labor unions, and professional groups
  have their own credit unions
• Offer members a full range of services
• Offer low interest loans, pay high interest rates

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Other Financial Institutions
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The Federal Reserve System

• Central banking organization in the US
• Set up in 1913 by congress
• Consists of
• 12 Federal Reserve district banks
• 25 branch banks
• About 5,000 member banks
• Run by board of governors, headed by a
  chairperson

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Functions of the Fed
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About Your Money
http//www.history.com/shows/modern-marvels/videos
/playlists/moneymaking-money
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(No Transcript)
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Federal Reserve Bank Identification Numbers

• Federal Reserve Bank Letter Number
• Boston A 1
• New York City B 2
• Philadelphia C 3
• Cleveland D 4
• Richmond E 5
• Atlanta F 6
• Chicago G 7
• St. Louis H 8
• Minneapolis I 9
• Kansas City, Mo J 10
• Dallas K 11
• San Francisco L 12

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Security Features of Notes

• Inclusion of Watermarks
• Security Threads embedded into the paper
• Fine line Printing patterns
• Micro printing
• Color shifting Ink
• Low Vision Features

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Security Features
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Unique Paper

• Red and Blue threads part of formula
• Only one company has the formula and is able to
  produce the paper
• Made of 75 Cotton and 25 Linen
• Watermarks are included into the paper when it is
  produced

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UV Light and Micro-printing

• 100 glows red under the light
• 50 glows yellow under the light
• 20 glows green under the light
• 100 Micro-printing on the collar and lower left
  100
• 50 Micro-printing on the collar and side borders
  50
• 20 Micro-printing on the Lower Oval of portrait
  and lower left numeral