Transcription

Module05FinancialServices:Care for Your Cash

About the NEFE High School Financial Planning Program SeriesBy picking up this booklet, you are on your way to making your dreams cometrue and headed down the path to financial independence. This program seriesincludes six topic modules to introduce you to the fundamentals of mindfulmoney management behaviors. Use what you learn in each module todevelop sensible habits to confidently manage your money and adapt tounexpected events.Program Modules1. Money Management: Control Your Cash Flow: goal setting –decision making – spending plan & budget – money management tips2. Borrowing: Use—Don’t Abuse: application process – loans –credit cards – costs – credit score – debt – rights & responsibilities3. Earning Power: More Than a Paycheck: earning potential –career plan – life stages – employee benefits – take-home pay – lifestyle4. Investing: Money Working for You: savings – investing – goals –options – risks & rewards – time value of money – diversification – plan5. Financial Services: Care for Your Cash: account types – fees –service options – transaction tracking – automation – identity protection6. Insurance: Protect What You Have: risk management – costs –claims – insurance types – coverage decisions – insurability factorsFind more money management tips and resources at www.hsfpp.org. 2013, National Endowment for Financial Education (NEFE ). All rights reserved.This publication may only be used for instructional and educational purposes as part of the NEFE High SchoolFinancial Planning Program (HSFPP). No part of this publication may be copied, reproduced, modified, orcombined with other material. This publication may not be used for any commercial purpose, and no separate fee orconsideration may be charged in exchange for this publication or for participation in the NEFE HSFPP.NEFE provides the HSFPP as a public service to enhance the financial literacy of youth. The program does notpromote financial products, financial planning organizations, individuals, or companies. However, to be effectivelytaught, the program often makes use of outside volunteer financial services professionals to add value in a classroomor similar setting. While providing this service, outside financial services professionals are not permitted to sell,advertise, or otherwise in any way promote the particular financial services organizations or products with which theymay be affiliated.

Module05FINANCIAL SERVICES:Care for Your Cash

Table of ContentsMEET JASON AND BRIANNA / page 3MONEY IN MOTION / page 4BEYOND BANKS / page 22WHO’S WHO IN FINANCIAL SERVICES / page 25TAPPING THE POWER OF FINANCIAL SERVICES / page 30THE CUTTING EDGE OF FINANCIAL SERVICES / page 32FOIL THE FRAUDSTERS / page 35Adding it up / page 392Fina ncia l Ser vices : C are f or You r C as h

Use the tips and strategies in this guide to do the following:»» Explain how financial services are used to handle transactions.»» Select a financial service provider.»» Use financial services to better manage your spending and saving.»» Explore trends that will change your banking and shopping life.»» Protect your money from thieves and con artists.MEET JASON AND BRIANNAJason wants a career in lawenforcement but he’s torn.Joining the local police force aftergraduation would keep him closeto his family and girlfriend. Buthe’s psyched at the idea of joiningthe Coast Guard, too, taking downsmugglers and drug traffickers allover the country.Right now, Jason has a checkingand savings account at a nearbycommunity bank. He likes the bank,but worries that using a small, localbank could be a problem if he joinsthe military next year. He’s also notthe best at managing his account.Brianna’s parents give her cash when she needs it. She’s trained most of her familyto give her gift cards for holidays and on her birthday. And if she ever needs to buysomething online, Brianna asks her mom to do it with her credit card.But the freshman starts her first job next week, working at the same store as herbest friend, Vanessa. Brianna doesn’t have a bank account yet—and doesn’t thinkshe needs one.To lear n m ore, vis it www.hs fp p .org3

With banks on every corner, prepaid cards in every checkout line, and a growingnumber of businesses eager to turn your checks into cash, how do you decidewhere to go with your money?Find out the options along with Jason and Brianna, as they help us explore varioustypes of financial services. Learn how to choose the best services for you, and putthem to work for you.MONEY IN MOTIONNothing beats the feel of a crisp, new 20 bill in your hand. But as you take onmore responsibilities after high school, you’ll run into situations where using cashisn’t the best option—if it’s an option at all.4Fina ncia l Ser vices : C are f or You r C as h

Among the downsides of using cash only:»» There’s no built-in proof of payment if things go wrong.»» It’s tempting to waste cash on lots of small, silly purchases—leaving you brokeand wondering “Where did it all go?” when it’s time to pay the bills.»» Once cash is lost or stolen, it’s gone for good.Credit cards aren’t always the best choice either. That’s especially true consideringthe fact that the interest paid on borrowed money has the potential to mushroominto a mountain of debt if you’re not careful. (You can learn more about creditcards in Module 2: Borrowing.) Luckily, there are plenty more ways to spend andreceive money.Other than using cash, how do you or family members exchangemoney to make purchases or pay bills?BANK ON ITThe center of most people’s daily financial lives is a bank* account.If you completed activities in Module 4: Saving & Investing, you learned about afew types of bank accounts. Savings accounts, money markets accounts, andcertificates of deposit can help you safely stash your cash for things that are trulyimportant to you. And earning interest on your savings grows your money fasterover time.But savings accounts don’t work for everyday spending. Federal regulationslimit account holders to no more than six withdrawals from a savings (or moneymarket) account each month. And keeping all your money in one account makes ittoo easy to tap into and drain the funds you were saving for a car, school, or otherfinancial goals.So, you need a second bank account to handle your bills and daily expenses.*In this guide, we’re using the shorter term “bank” instead of repeating “bank and credit union”every time—but we mean both.To lear n m ore, vis it www.hs fp p .org5

CHECK OUT CHECKING ACCOUNTSEven if you never write a check, a checking account will keep your money safewhile allowing you to access it several different ways.A check is a written order telling the bank who to pay and how much. Signingyour name at the bottom means you agree to pay the amount “on demand,” or assoon as the person you’ve written the check to (aka the payee) depositsthe check.While debit card use is leaving check use in the dust, checks do still have somebenefits, such as: Convenience of Mailing. Dropping a check in the mail is less hassle thanstanding in line to pay with cash or get a money order. Proof of Payment. Your cleared check serves as proof of payment for goods,services, and charitable donations. Safety. Lost or stolen checks can be replaced. You also can request astop-payment order to prevent a check of yours from being cashed in cases ofsuspected theft or if you realize the check was written in error. Debit Card Backup. Write a check to yourself and get cash from a bank. Direct Deposit. In some cases, you’ll need to provide your employer with avoided blank check from your account to enroll in automatic deposit, in whichyour paycheck is electronically deposited into your account. Ease of Tracking. Recording transactions in a check register makes it easy totrack your spending. Interest. Some checking accounts pay interest on your average balance.6Fina ncia l Ser vices : C are f or You r C as h

There are a few cons, too: Delayed Deduction. You don’t know when the payee will deposit your check.The amount won’t be deducted from your account until the cashed check isreceived at your bank and processed. Keep track of the checks you write tocompare with what is processed at the bank. Check Fraud. A stolen check or the information on your check might be usedto access the money in your account. Guard your checks from getting into thewrong hands.Checks are still the most convenient option in somesituations. So, you may want to order a box of checks tohave on hand when you need one. Be sure to store yourchecks in a safe place.Activity 5.1: Proof of PaymentGive two instances in your life when a check is a good option to use as proof ofpayment rather than paying with cash.To lear n m ore, vis it www.hs fp p .org7

What’s on a check?1 Date the check was written2 Payee, the person or company receiving payment3 The amount of payment, in numbers4 Total payment, in words5 Memo (description of payment), optional6 Payer’s signature7 Routing number used to identify the financial institution that holds the7 account funds8 Checking account number9 Check number (also in upper-right corner)ELPSAMAlways write out a check in pen so nothing can be changed. If you make a mistake,initial any corrections you make, or write “VOID” across that check and fill out anew one. Before you destroy the voided check, record it in your check register.8Fina ncia l Ser vices : C are f or You r C as h

Activity 5.2: Check Writing 101Practice writing checks for the following purchases. Use today’s date, and be sureyour handwriting is legible so the payee and the bank accept the check. In a realsituation, you want to be sure that the bank can clearly read the check to deductthe correct amount from your account. (Your instructor will provide checks, or youcan download checks from www.hsfpp.org.)»» Buy a pair of tickets for an upcoming school event with a check payable to yourschool, 42.50»» Pay rent to Mayfair Apartments, 750»» Contribute to a disaster fund with a check payable to the American RedCross, 25To lear n m ore, vis it www.hs fp p .org9

PRESTO! YOUR CHECK IS NOT A CHECKSome businesses use the information on your paper check to instantly convert itto an electronic check (aka e-check). They must post a notice that the transactionwill be processed via electronic funds transfer (EFT) so you know the checkamount will be immediately deducted from your account!EFT basically means that an electronic message tells a computer to move moneyfrom one bank account to another. With it, banks can transfer small or massiveamounts of money in an instant, without cash or paper ever changing hands.Even if you don’t use paper checks, you can “write” an e-check when paying onlineor by smartphone. And you may want to. Some businesses that charge customersa transaction fee for credit card payments accept e-checks for free.To “write” an e-check, complete a short form, providing your bank’s routingnumber and your account number. These two numbers can be found at thebottom of a paper check:»» Bank Routing Number. The unique nine-digit number telling the payee’s bankwhich bank to get the money from. It’s found between the symbols, shownas 123456789 on the sample check.symbol, it tells your»» Your Account Number. Found directly to the left of thebank which account to use for the funds. On this check the account number is000-111-555.ELPSAM10Fina ncia l Ser vices : C are f or You r C as h

NOT-SO-FREE CHECKINGFree checking accounts are usually the best deal in banking. But “free” doesn’tmean totally without cost. It just means no monthly fee. In some cases, you’rerequired to keep a minimum balance to qualify.Fee types and amounts will vary. Scan the chart for a list of the most common fees.Fast Facts About Banking FeesTypes of FeesCharged When Monthly ServiceFeesHaving an account (unless you have free checking)Out-of-NetworkATM FeesUsing an automated teller machine (ATM) not ownedby your bank or in a network your bank belongs toCheck FeesWriting more checks than you’re allowed in a monthDebit FeesChoosing “debit” for a debit card purchase (akapoint-of-sale (POS) fees) at checkoutNonsufficient Funds(NSF) FeesWriting a check for an amount that exceedsyour balanceOverdraft (OD) FeesHaving an electronic transaction that exceedsyour balanceOD Transfer FeesYou authorize a bank to transfer money from anotheraccount to prevent an overdraft transactionDeposited ItemReturned FeeDepositing a check when there isn’t enough money inthe payer’s account to cover the check amountStop Payment FeesInstructing your bank to cancel a check you wrotebefore it’s cashedSource: Still Risky: An Update on the Safety and Transparency of Checking Accounts, The Pew Charitable Trusts, June2012, www.pewstates.org/uploadedFiles/PCS Assets/2012/Pew Safe Checking Still Risky.pdfTo lear n m ore, vis it www.hs fp p .org11

Don’t let the fees scare you away! You can avoid many of them simply bymanaging your account responsibly. Others, like ATM fees, can be avoided byusing your own bank’s ATMs or using debit card purchases to get cash back.Plus, unlike with other forms of payment, banks must clearly disclose all fees topotential customers. That makes it easy to comparison shop for the bank servicesyou want most.OTHER PAYMENT OPTIONSOccasionally, you may be asked to pay in a way that gives the payeeconfidence that a payment will clear quickly.Certified Check. The bank verifies that you have the funds in your accountset aside specifically for the check amount and confirms that your signatureon the check is genuine. A payee might request this type of check toguarantee that your check will clear the bank, especially when you need tomake a large payment for something such as a car.Cashier’s Check. The bank deducts the amount from your account and writesthe check on its own funds. This is another way for the payee to ensure thatthe check is good. Another inst