Money and
Financial
Institutions
CHAPTER 12
YAYYYY!!
NOTES NOTES NOTES!
POST-IT NOTE #1: Write the
name of something you
purchased in the last week and
who purchased the item for
you.
POST-IT NOTE #2: If the money
did not exist, how would you
pay for these items?
Money and Banking
CHAPTER 12.1
The Purpose of Money
 Enables
people and businesses to buy
and sell goods/services.
A
standard of value and a means of
exchange or payment
3 Functions of Money
 Medium
of Exchange
 Standard
 Store
of Value
of Value
 Pages
197-198
The Functions of Banks
 Storing
Money
 Transferring
 Lending
Money
Money
Storing Money
 Bank
Account
 Deposit
 Withdrawal
 Interest
Transferring Money
 Electronic
 Direct
Funds Transfer
Deposit
Lending Money
 Primary
way that banks generate a profit.
 Collateral
 Figure
12.1 – Draw in notes
Other Financial Services
 Safe-deposit
 Credit
box
cards
 Money
management
Extending Activity
 In
your notes, write down the name of the
bank that your parents or family members
use.
 Using
your iPad, go to the website of that
bank. What services does that bank offer
families, businesses, and students? See
what you can find – be prepared to
share.
Types of Financial
Institutions
CHAPTER 12.2
Financial Institutions
1.
Operate on state, national, and
international levels.
2.
Strict rules to start
3.
Charter needed
4.
In the US – 3 main types of banks
Commercial Banks
1.
Majority of banks
2.
Wide range of financial services
3.
‘Full-Service’ banks
4.
Serve individuals and businesses
5.
Charge interest
Savings and Loan
1.
Hold money in high interest accounts
2.
Originally for mortgage loans
3.
Purpose – encourage people to start
saving for home or business
4.
1982, allowed to charge more interest
1.
5.
Late 1980s, majority failed
Now, very similar to commercial banks.
Credit Unions
Not-for-profit
Set
banks
up by customers for use
Credit
cards, checking accounts,
low interest loans, high interest
savings.
Many
also pay interest on checking
Other Financial Institutions
1. Mortgage
a.
Other financial institutions
b.
Offered at other banks as well
c.
Provides loans for buying a home
2. Finance Companies
a.
Other financial institution
b.
Offer short-term loans to
businesses and consumers
3. Insurance Companies
a.
Other financial institutions
b.
Provide protection
c.
Fire, theft, etc.
d.
Offers loans to businesses and
consumers
4. Brokerage Firms
a.
Other financial institution
b.
Sells stocks and other investment
tools
c.
Financial Advising
The Federal Reserve System
1.
Est 1913
2.
Mission – to provide the US with safe,
flexible, stable financial system
3.
Monitors the money supply
4.
The central bank of the US, “The Fed”
5.
Contains 12 regional banks (pg 204), 25
bank branches, and about 5,000 member
banks
6.
Board of Governors
6 Functions of “The Fed”
1.
Clearing Checks
2.
Acting as the Federal Government’s Fiscal
Agent
3.
Supervising Member Banks
4.
Regulating the Money Supply
5.
Setting Reserve Requirements
6.
Supplying Paper currency