Banks and Profit Banking and Financial Services Finance Lesson Plan
Performance Objective Students will understand and analyzes financial resources that are used to assess banking performance. Specific Objective  Understands the variety of banking fees that generate profit.  Identify insurance services offered by banks.  Describe the types of investments that banks make to raise revenue. Terms  Bonds – a debt issued by a government or company, buying bonds means you are loaning money to that entity  Maturity – the date when proceeds and interest can be paid on bonds  ATM – Automated Teller Machine – a machine that computerizes and provides self‐service banking  Insufficient funds – when there are not sufficient funds in an account to cover a payment  Gramm‐Leach‐Bliley Act of 1999 – allows banks to sell insurance as well as investment products  risk – the possibility of loss  Insurance ‐ offers financial protection in the event of a loss  Beneficiary – someone who receives a financial benefit from a life insurance policy upon the death of the insured person  Property (and casualty) insurance – insurance that covers the cost of property that may be lost or damaged  Liability insurance – insurance that covers expenses incurred as the result of a loss such as medical (for an injured person) and legal expenses  Premiums – amounts paid on a regular basis to ‘purchase’ insurance  Credit life – insurance that pays off loan balances upon the death of the insured person  Mortgage life – similar to credit life but applies to paying off a mortgage loan as opposed to other loans  Trust – legal documents stating how a client’s assets are to be handled  Trustee – the person who receives fees for managing a client’s assets  Assets ‐ property and possessions  Estate – the assets of an individual  401 (k) – a retirement plan that is employer‐sponsored but can be rolled over into a retirement plan offered by a bank  Investment underwriting – when a bank acts as an intermediary between a company issuing new stock and the public who may want to buy shares  Spread – the difference between what the bank pays for the company’s shares and what they sell the shares for to the public  Merger – when two or more companies combine to form a new company Copyright © Texas Education Agency, 2014. All rights reserved.
1



Acquisition – when a company purchases or takes control of another company, usually through purchasing the stock in the company Edge Act corporations – investment banks chartered by the Federal Reserve to perform certain international banking activities Correspondent banks – an agent of a U. S. bank operating in another country Time When taught as written, this lesson should take approximately 4‐5 days to teach. Preparation
TEKS Correlations: This lesson, as published, correlates to the following TEKS. Any changes/alterations to the activities may result in the elimination of any or all of the TEKS listed. 130.163. (c) Knowledge and Skills (8) The student maintains, monitors, controls, and plans the use of financial resources to enhance banking performance. The student is expected to: (A) describe the manner in which banks generate profit and explain measures banks take to ensure profitability. Interdisciplinary Correlations: English‐English I  110.31(b) (1). Reading/Vocabulary Development. Students understand new vocabulary and use it when reading and writing.  110.3(b) (11). Reading/Comprehension of informational text/procedural texts. Students understand how to glean and use information in procedural texts and documents. Math‐Algebra I  111.32(b) (1) (C). Interpret and make decisions, predictions, and critical judgments from functional relationships. Social Studies‐World Geography 113.34(c) (20) (A) Describe the impact of new technologies, new markets, and revised perceptions of resources. Occupational Correlation (O*Net – www.onetonline.org/): Job Title: Financial Managers, Branch or Department O*Net Number: 11‐3031.02 Reported Job Titles: Collections Vice President, Consumer Lending Vice President, Consumer Loan Manager Copyright © Texas Education Agency, 2014. All rights reserved.
2
Tasks: Plan, direct, or coordinate the activities of workers in branches, offices, or departments of establishments, such as branch banks, brokerage firms, risk and insurance departments, or credit departments. Oversee the flow of cash or financial instruments. Approve, reject, or coordinate the approval or rejection of lines of credit or commercial, real estate, or personal loans. Speaking, Judgment and Decision Making, Complex Problem Solving Soft Skills: Accommodations for Learning Differences It is important that lessons accommodate the needs of every learner. These lessons may be modified to accommodate your students with learning differences by referring to the files found on the Special Populations page of this website. Preparation  Review and familiarize yourself with the terminology and website links  Have materials and websites ready to go prior to the start of the lesson. References  http://faculty.business.utsa.edu/dtruett/5003smpls/The%20Basics%20of%20Treasury%20Securities.pd
f  Banking and Financial Systems, 2013, Goodheart‐Wilcox  http://www.newyorkfed.org/research/monthly_review/1964_pdf/05_3_64.pdf  http://www.consumerfinance.gov/blog/student‐banking‐101/ Instructional Aids  Textbook  Lesson Presentation  Instructor Computer/Projection Unit  Online Websites Introduction
The main purposes of this lesson are to help students understand  the types of fees that a bank offers.  the benefits of student accounts.  the many ways those banks can earn money. Copyright © Texas Education Agency, 2014. All rights reserved.
3
Ask students if they know what the largest form of income is for a bank. Ask students if they know what the largest expense of a bank is. Copyright © Texas Education Agency, 2014. All rights reserved.
4
Outline
I. II. How banks make money A. Loans B. Investments C. Fees D. Credit cars Loans A. interest‐a fee paid for the use of money B. largest amount of income for banks C. amount of interest determined by: 1. borrower credit 2. market rates III. IV. Investments A. Short‐term‐one year or less B. Medium‐term‐from one to ten years C. Long‐term‐longer than ten years Short‐term investments A. mature in less than one year B. treasury bills most common: 1. issued by the United States Treasury 2. very low risk 3. typically issued in terms such as one‐, three‐, six‐
month terms as well as one year Banks make money in a lot of ways but the largest amount of income comes from the interest and fees from the loans they make. Obtain several brochures from different banks, highlight the various fees they have on their accounts, and show the students. Then students, in pairs, should look up one of the company’s web sites, and see if the same fees are offered online. Explain to students that businesses do not usually deposit their revenue into the bank and leave it there. They invest much of it to try to earn more money off their revenue. That is why the largest form of income is from the investments that banks make. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
5
Visual/Spatial
V. VI. A. VII . VIII. Medium‐term investments A. can be one to ten years B. treasury notes most common C. interest typically paid every six months Long‐term investments held for at least ten years B. bonds are most common 1. savings bonds a. earn interest up to thirty years b. may not be transferred to another person c. interest paid at maturity 2. treasury bonds a. pays interest every six months b. can be up to thirty years as well c. may be transferred Income from fees A. checking account fees B. ATM fees C. safe deposit box fees D. credit card fees E. other types of fees Checking account fees A. monthly maintenance, or service, fees B. NSF (Insufficient funds) fees for checks and debit cards C. stop payment fees
Banks expect to be in business for the long‐term; therefore, many of their investments are longer‐term as opposed to just short‐term investing. Have students look on some of the bank web sites and see what they offer for students. Many services are discounted for high school and college students. Ask those students who have a checking account and use a debit card if they know if their card gets charged or declined if they try to use it when there is not enough in their account. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
6
Visual/Spatial
IX. X. XI. ATM fees A. ATM‐automated teller machine, a machine that computerizes and provides self‐service banking B. fees for using another bank’s ATM C. fees for some basic banking services Safe deposit box fees A. fees to lease a box B. fee for lost keys C. fee for late box rental payments Credit card fees A. can be annual fee to have the card B. fee for late payments C. fees for going over your credit limit D. cash advance fees XII. Other bank fees A. wire transfer fees B. online banking fees C. fees for money orders D. notary fees XIII. Income from insurance services A. Life B. Property & liability C. Medical Again have students look at banking web sites and navigate the site to locate fees. Have a student volunteer to write the fees on the board or document camera. Occasionally some of these other bank fees are waived if you have an account at that bank, which is another way of attracting customers to that bank. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
7
Visual/Spatial
XIV. Life insurance A. protects against risk‐the possibility of loss B. beneficiary‐someone who receives a financial benefit from a life insurance policy upon the death of the insured person C. types of life insurance: 1. credit life‐insurance that pays off loan balances upon the death of the insured person 2. mortgage life‐similar to credit life but applies to paying off a mortgage loan as opposed to other loans XV. Property and liability insurance A. property insurance‐covers the cost of property that may be lost or damaged B. liability insurance‐covers expenses incurred as the result of a loss such as medical and legal expenses C. two most popular types 1. automobile 2. homeowner’s XVI. Property and liability insurance for businesses A. Property covers damage or loss to property of a business especially property that can affect the income of a business Banks have recently begun selling different types of insurance as another means of making profit. Discuss with students what premiums are, and that when customers pay premiums (which are periodic payments to purchase insurance) the banks treat them as part of their income stream. Show students several different bank web sites that offer insurance Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
8
Visual/Spatial
B. Liability again covers expenses that are related to legal issues of a loss such as a lawsuit, which can affect the value of a business XVII. Medical insurance‐two most common types offered by banks: A. health‐costs covered as a result of an accident or illness B. disability‐cost depends upon: 1. the percentage of income that will be replaced, for example, the higher the % the higher the premium 2. how long after the accident, illness, or injury the replacement income begins, for example, the sooner the payments start, the higher the premium XVIII. Trust services A. Individuals B. Businesses C. Investment banking services D. International banking XIX. What are trust services? A. trust‐legal documents stating how a client’ assets are to be handled B. trustee‐the person who receives fees for managing Many individuals obtain insurance from their employer but many banks make insurance available for purchase. Ask students if they understand how insurance works and discuss the process with them. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
9
Visual/Spatial
a client’s assets C. provided mostly by larger banks due to the expertise results XX. Individuals A. retirement planning 1. 401(k) 2. employer‐sponsored retirement plan offered by a bank B. estate management 1. estate‐the assets of an individual 2. planning the estate a. preparing wills b. determining how assets will be transferred upon a client’s death 3. settling an estate a. determining the value of assets b. paying taxes and other debts of an estate c. distributing assets XXI. Businesses A. Accounting B. Capital C. Collection D. Credit card E. Information Many customers today have a relationship with their bank. Explain how banks have capitalized on this relationship to be able to offer trust services. Explain the concept of retirement and estate planning. Students can also research these topics to add to their understanding. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
10
Visual/Spatial
XXII. Description of business services A. Accounting – payroll, accounts payables and receivables, cash management services B. Capital – purchases of major capital assets, financing of those assets C. Collections – armored car services, deposits, electronic funds transfers D. Credit card – issuing credit cards, conducting credit services E. Information – wire transfers, data and reports necessary for businesses XXIII. Investment banking services A. underwriting services 1. investment underwriting – when a bank acts as an intermediary between a company issuing new stock and the public who may want to buy shares 2. spread – the difference between what the bank pays for the company’s shares and what they sell the shares for to the public B. mergers and acquisitions 1. professionals assist in negotiating terms and determining value of businesses for a fee Banks also receive fees for the services they perform for their business customers. While banks make their own investments to try to raise additional revenue, they also perform investment services for their customers for a fee. Show the students on a bank web site the types of investment services that are offered. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
11
Visual/Spatial
2. merger – when two or more companies combine to form a new company 3. acquisition – when a company purchases or takes control of another company, usually through purchasing the stock in the company XXIV. International banking A. services of banks that do business internationally B. services of foreign banks that conduct business in the U. S. C. Edge Act corporations – investment banks chartered by the Federal Reserve to perform certain international banking activities D. Correspondent banks – an agent of a U. S. bank operating in another country Have students search while you show them where to locate international banking services. Ask students what services they think would be needed or convenient to have in another country. Multiple Intelligences Guide
Existentialist
Interpersonal
Intrapersonal
Kinesthetic/
Bodily
Logical/
Mathematical
Musical/Rhythmic
Naturalist
Verbal/Linguistic
Copyright © Texas Education Agency, 2014. All rights reserved.
12
Visual/Spatial
Application
Guided Practice In pairs, have students select a bank to review online. Have the pair look at the bank’s web site and make a list of all of its fees that are charged. Designate a student recorder to write responses on the board for the following: ask each group to name a fee and the recorder writes it down. Another pair can give a different response to be written on the board. Continue around the class until there are no more fees that have not already been recorded. Independent Practice Have students conduct internet research and search what the breakdown of income is for a bank. If there are any other sources of revenue that have not been discussed in this lesson, write it down on a card and turn it in so it can either be categorized into the four categories of income sources we discussed or it will be discussed as a new source. Summary
Review Ask students the following questions on exit tickets: Question #1: What are four ways that banks earn money? Answer #1: Through loans, investments, fees, and credit cards. Question #2: What is the largest source of income for banks? Answer #2: Interest from loans made to borrowers is the largest source of income. Question #3: What are two of the checking account fees that are charged? Answer #3: Monthly maintenance fees and insufficient funds fees. Question #4: What are the most common types of insurance that banks sell? Answer #4: Life, property and liability, and medical. Question #5: What is the most common trust service for individuals? Answer #5: Estate planning is the most common for individuals. Evaluation
Informal Assessment Any and all of the following can be used as informal assessments…  Exit tickets with vocabulary  Pair‐share activities  Class discussion and participation Formal Assessment Copyright © Texas Education Agency, 2014. All rights reserved.
13
The following can be considered a formal evaluation:  Bank Fees Comparison Diagram Assignment #1 – Students will research, either online, or by checking with local banks in their area, all of the fees that at least 3 banks charge their customers. They will then create a Venn diagram where each of the banks are in a circle, the fees that are the exact same for all three banks are in the middle overlapping section, any fees that are the same between two banks are in the overlapping section for the two banks, and fees that are not the same for any of the banks will remain in that particular bank’s circle.  International Banking Services Assignment #2 – Students will research, either online, or by checking with local banks, to see what international banking services they offer. They will create a flyer that displays all of the services offered, for example, currency conversion, traveler’s checks, and other services. Include appropriate graphics. They should include this information for one bank as well as the costs for the services.  Student Account Assignment #3 – Using the following web site, http://www.consumerfinance.gov/blog/student‐banking‐101/ or they can go to any bank’s web site and locate information for student accounts. In pairs students will review the different banking services available to students. They will then create a ‘commercial’ (either a skit or video), intended to market student accounts to the class, that states at least 5 features of the accounts in a creative way. Enrichment
Extension Interview a branch manager of a bank and ask them how important they feel the spread is to the profits of a bank. Ask them what types of products and services specifically earn their particular bank the most interest or revenue. Summarize your findings in a document and present to the class. Copyright © Texas Education Agency, 2014. All rights reserved.
14
Banks and Profit Bank Fees Comparison Diagram Assignment #1 Student Name: _____________________________ CATEGORY 20 15 The diagram is attractive in terms of design, layout and neatness. 8 1 Attractiveness The diagram is exceptionally attractive in terms of design, layout, and neatness. Content ‐ Accuracy At least 5 At least 3‐4 Only 2 accurate accurate facts for accurate facts for facts for each of each of the three each of the three the three banks banks are banks are are displayed on displayed on the displayed on the the diagram. diagram. diagram. Knowledge Gained Student appears Student can Student can Student can to have accurately accurately accurately insufficient answer all answer most answer about questions related questions related 75% of questions knowledge about to facts in the to facts in the related to facts the facts or poster and poster and in the poster and processes used processes used processes used processes used in the diagram. to create the to create the to create the diagram. diagram. diagram. Mechanics Capitalization There is 1 error and punctuation in capitalization are correct or punctuation. throughout the diagram. There are 2 errors in capitalization or punctuation. Required Elements The diagram includes all required elements as well as additional information. All but 1 of the Several required required elements were elements is missing. included on the diagram. All required elements are included on the diagram. The diagram is The diagram is acceptably distractingly attractive though messy or very it may be a bit poorly designed. messy. It is not attractive. Less than 2 accurate facts for each of the three banks are displayed on the diagram. There are more than 2 errors in capitalization or punctuation. Maximum Points Possible: 100 Student Points: ___________ Copyright © Texas Education Agency, 2014. All rights reserved.
15
Banks and Profit International Banking Services Assignment #2 Student Name: _____________________________ CATEGORY 20 15 8 1 Attractiveness The flyer is exceptionally attractive in terms of design, layout, and neatness. The flyer is attractive in terms of design, layout and neatness. The flyer is The flyer is distractingly acceptably messy or very poorly attractive though designed. It is not it may be a bit attractive. messy. Required Elements The flyer includes all required elements as well as additional information. All required elements are included on the flyer. All but 1 of the Several required required elements were missing. elements is included on the flyer. Graphics ‐ Relevance All graphics are All graphics are related to the related to the topic and make it topic and most easier to make it easier to understand. All understand. All borrowed borrowed graphics have a graphics have a source citation. source citation. All graphics relate to the topic. Most borrowed graphics have a source citation. Mechanics Capitalization There is 1 error and punctuation in capitalization are correct or punctuation. throughout the flyer. There are 2 There are more than 2 errors in errors in capitalization capitalization or or punctuation. punctuation. Knowledge Gained Student appears to Student can Student can Student can have insufficient accurately accurately accurately knowledge about the answer all answer most answer about questions related questions related 75% of questions facts or processes used to facts in the to facts in the related to facts in the flyer. poster and poster and in the poster and processes used processes used processes used to create the to create the to create the flyer. flyer. flyer. Graphics do not relate to the topic OR several borrowed graphics do not have a source citation. Maximum Points Possible: 100 Student Points: ___________ Copyright © Texas Education Agency, 2014. All rights reserved.
16
Banks and Profit Student Account Assignment #3 Student Name: _____________________________ CATEGORY 20 15 8 1 Research Group Group researched the researched the subject and subject and integrated 5 or integrated 4 more "tidbits" "tidbits" from from their their research research into into their their commercial. commercial. Group researched the subject and integrated 2‐3 "tidbit" from their research into their commercial. Either no research was done or it was not clear that the group used it in the commercial. Accuracy of Facts All supportive facts are reported accurately. Almost all facts are reported accurately. One fact is reported accurately. No facts are reported accurately OR no facts were reported. Speaks clearly Speaks clearly and distinctly all of the time and mispronounces no words. Speaks clearly and distinctly all of the time but mispronounces 1 or more words. Speaks clearly and distinctly most of the time and mispronounces no words. Does NOT speak clearly and distinctly most of the time AND/OR mispronounces more than 1 word. Enthusiasm Facial expression and body language show an optimal interest and enthusiasm about the topic throughout the commercial. Facial expression and body language show a strong interest and enthusiasm about the topic throughout the commercial. Facial expression and body language show some interest and enthusiasm about the topic throughout the commercial. Facial expression and body language depict apathy or boredom with the topic. Group Work The group functioned exceptionally well. The group The group Some members of the functioned pretty functioned fairly group were often off well. well. task. Maximum Points Possible: 100 Student Points: ___________ Copyright © Texas Education Agency, 2014. All rights reserved.
17