Chapter 5 Financial Services
Money market fund
A combination savings-investment plan, on which you can write a limited number of checks
Who commonly creates trusts
A commercial bank or lawyer
Trust
A legal agreement that provides for the management and control of assets by one party for the benefit of another
Asset management account
All-purpose account offered by investment brokers and financial institutions
Credit Unions
Are user-owned, nonprofit, cooperative financial institutions Annual banking studies report lower fees and lower loan rates with higher satisfaction levels compared to other financial institutions
Traditional electronic banking
Automatic teller machine (ATM; also called a cash machine) offers various transactions Debit card (or cash card) used to make purchases with your own funds
What requires a cash management plan?
Buying groceries, paying the rent, and completing other routine spending activities
What is another name (2) for an asset management account?
Cash management account Wealth management account
What is the most common payment choices
Cash, check, credit card, debit card, and online/mobile transfer
Check-cashing outlets
Charge from 1% to 20% of the face value of a check; the average cost is 2% to 3% Sometimes called currency exchanges
Benefits of online and mobile banking (3)
Convenience Saving time Instant info access
Cash availability and payment services (3)
Demand deposits Checking accounts Other payment methods
Brokerage Firms
Employ investment advisers and financial planners which serve as agents between the buyer and seller for stocks and bonds
What is a major concern of prepaid debit cards
Extensive number of fees a user can encounter due to few current regulations for these cards
Borrowing
For the short-term and long-term
Credit card companies
Fund short-term retail lending
Investments and other financial services
Insurance Investment Real estate purchases Tax assistance Financial planning
Prepaid debit cards
Issued by many financial service providers including banks, credit card companies, retailers (such as Walmart), and nonbank companies
What are the benefits of prepaid debit cards?
Lowering consumer debt by helping to control spending and buying on credit
Pawnshops
Make loans on tangible items but charge higher fees than other financial institutions; used for quick cash; charge can range from 3% to over 100% interest
Finance Companies
Make short and intermediate term loans to consumers and small businesses but at higher rates
What is another name for investment companies?
Mutual funds
Commercial banks
Offers a full range of services including checking, savings, lending, and other services Organized as corporations
Mistakes made frequently in managing current cash needs include (4).....
Overspending from impulse buying and using credit Not having enough liquid assets to pay current bills Using savings or borrowing to pay for current living expenses Failing to put unneeded funds in an interest-earning savings account or investment program
The "Unbanked" and High-Cost Alternative Financial Services
Pawnshops Checkin-cash outlets Payday loans Rent-to-own centers Car title loans
What do banks, credit unions, and other financial institutions provide?
Payment, savings, or credit services
Concerns of online and mobile banking (5)
Privacy Security of data Ease of overspending Costly fees Online scams
Mortgage companies
Provide loans specifically for buying a home or business
Life Insurance Companies
Provides financial security for dependents Offers insurance plus savings and investment features; recently expanded to offer investment and retirement planning
Types of Financial Services (4)
Savings Cash availability and payment services Borrowing Investments and other financial services
Mutual savings banks
Specialize in savings and mortgages They are owned by their depositors Mainly located in northeastern United States
What might a parents set aside a trust for?
Their children's education
Savings (3)
Time deposits Savings accounts CD's
What does banking mean today?
Today, banking may mean a credit union, an ATM, or a phone app to transfer funds
Asset management accounts provide complete financial service program for a single fee and includes (5)
Tracking your money in one location Fewer monthly and quarterly statements Lower fees for maintaining a large balance Simplified tax reporting Ease of communicating your financial situation to family members
Savings and Loan Associations
Traditionally, specialized in savings accounts and home mortgages Today, offer services comparable to banks
True or false: Prepaid debit cards are a popular alternative to checking accounts
True
What do you do when you need more cash than you have available? What does it do to your networth?
You either liquidate savings or borrow Using savings or borrowing reduces your net worth
