Chapter 5 Financial Services

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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


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