Personal Financial Literacy: Week 5 Study Guide

The present limit for insuring any account at participating banks through the FDIC is ________________.

$250,000.00

Even though we should be careful with our money and valuables, what does the Bible say about the things of this world and wealth?

- "Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal." -Matthew 6:19 - "For where your treasure is, there your heart will be also." -Matthew 6:21 - "Jesus said to the rich young ruler, "You lack one thing: go, sell all that you have and give to the poor, and you will have treasure in heaven; and come, follow me." - "But lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal." -Matthew 6:20

Because banks are federally regulated, there are certain guidelines that they have to follow. What are some of these guidelines?

- A bank has to maintain a certain ratio of how much it lends compared to its capital assets. - A bank is insured by the FDIC and must follow its guidelines in order for its depositors to be covered against loss. - A bank has to have a minimum amount of capital holdings to do business. - A bank is regulated to make sure it does not lend more money than it can safely cover with assets and depositors' monies. - A bank has to abide by guidelines set up by the Federal Reserve System.

There are several reasons why people should use a financial institution to help them with managing their money. Choose all valid reasons to have an account with a financial institution.

- It allows quick access to your money. - It is cheaper than other possible alternatives. - You are insured against losses up to the federal maximum amount. - It provides a safe place for your money. - It helps with establishing credit and getting loans.

What four responsibilities does the Federal Reserve System have that were also the responsibilities of its predecessors, the First and Second Bank of the United States?

- Receives revenues for the federal government. - Acts as the federal government's fiscal agent. - Makes payments for the federal government. - Holds deposits for the federal government.

Online financial institutions offer all services that "brick and mortar" institutions offer, EXCEPT these:

- a teller working at a walk-up office - branch manager offices to sit down and discuss your account in

What are the three main types of financial institutions available to help you manage your finances?

- banks - credit unions - thrifts

Choose all statements that describe a "bank."

- charges fees and interest to pay administrators and stock holders - a financial institution - a financial institution - accepts deposits to accounts - regulated by the government - invests in capital markets to make money for the institution as well as its customers

The FDIC insures different kinds of accounts at participating financial institutions. Choose all of the accounts or investing programs that are covered by the FDIC.

- checking accounts - statement savings accounts - Money Market Deposit Accounts - certificate of deposits (CDs) - passbook savings accounts

Choose all statements that describe a "thrift."

- limited by law as to the amount of assets it can use for commercial loans - also known as a savings and loan association - a mutually held corporation with decisions made by depositors and borrowers - specializes in making money off of mortgages and personal loans to its members - a financial institution

Choose all statements that describe a "credit union."

- provides services only to its members - not for profit - member-owned - accepts deposits to accounts like a bank - a financial institution - profits and surpluses go to pay administrators and provide services for members

Financial institutions do not offer their services for free. You may have a free checking account, and you may receive interest on the money you have in a savings account, CD, or money market account; however, the institution will charge you fees for a variety of reasons. Choose all charges discussed in the lesson that can be levied against an account owner.

- teller fee for every transaction a teller helps you with - monthly or annual account fees - membership fees at credit unions - minimum balance fee - ATM transaction fee - non-sufficient funds fee - overdraft fee

The Federal Reserve System was established in ________ and was the _______ attempt by the United States government to establish a central banking system. Unlike its two predecessors, the Federal Reserve System was not limited to a ________ by the passing of the McFadden Act of 1927. The Banking Act of 1933 established the _________ to protect the deposits of consumers against bank failure. _________ financial institutions are members of the Federal Reserve System today.

1. 1913 2. third 3. 20-year charter 4. Federal Deposit Insurance Corporation 5. Some

Alexander Hamilton was the first Secretary of ________. He believed in a strong federal government with a centralized banking system . Hamilton's critics attacked him by stating that a central government-run bank would be _________. The first Bank of the United States was a _______ institution and was owned by a majority (70%) of _________ investors.

1. Tresury 2. banking system 3. a monopoly and unconstitutional 4. private 5. foreign

Since being created in 1933, the FDIC has caused participants to lose how much money?

No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.

What is the FDIC?

The Federal Deposit Insurance Corporation is an independent federal agency created to promote public confidence and stability in the nation's banking system.

What event in American history had a profound effect on modern-day banking regulations and policy?

The Great Depression

Why are financial institutions safe places to keep your money?

They are regulated by federal guidelines and are in business to make money for their depositors, members, and/or stock holders.

In the 1970's under the Carter administration, the United States was plagued with __________________.

high inflation and high unemployment

What is the source of funding used by the FDIC to pay insured depositors of a failed bank?

premiums already paid by insured banks and interest earnings on its investment portfolio of U.S. Treasury securities

In a financial institution that is federally insured, deposited money is safe from ____________________.

theft, loss, and fire