Banking and Financial Accounts

• Banks are for-profit institutions owned by investors.
• Credit Unions are non-profit financial cooperatives owned by their members.
• Banks and Credit Unions differ in terms of fees, interest rates, customer service, and membership eligibility.

Types of Financial Accounts

• Checking Accounts are used for daily transactions and may earn interest.
• Savings Accounts are designed for saving money and earn interest.
• Money Market Accounts are a hybrid of checking and savings accounts, offering higher interest rates.
• Certificates of Deposit (CDs) are fixed-term deposits with higher interest rates.

Maximizing Your Money

• Interest and Compound Interest grow your money through earned interest.
• Annual Percentage Yield (APY) determines how much interest you earn in a year.
• Time Value of Money means the sooner you start saving, the more you benefit from compound interest.
• Banks offer services, such as savings, checking, loans, credit cards, and investment options.
• Credit Unions are similar to banks but are member-focused, and tend to have lower fees.
• Online Banks are digital-only banking options, often with lower fees and higher interest rates.

Banking Terms

• The Federal Deposit Insurance Corporation (FDIC) insures bank deposits up to $250,000.
• The National Credit Union Administration (NCUA) insures credit union deposits up to $250,000.
• Overdraft Protection prevents transactions from being declined due to insufficient funds.
• The Federal Reserve ("The Fed") was created in 1913 to stabilize the U.S. monetary system.
• The Federal Reserve is not owned by anyone and operates independently within the U.S. government.

Roles of the Fed

• Controlling money supply and inflation.
• Setting interest rates.
• Supervising and regulating banks.

Influencing the Economy

• Monetary Policy Tools:
  • Open Market Operations: buying/selling government bonds to adjust money supply.
  • Reserve Requirements: the percentage of deposits banks must hold in reserve.
  • Discount Rate: the interest rate the Fed charges banks for loans.
• Lowering interest rates encourages borrowing and economic growth.
• Raising interest rates slows inflation and reduces borrowing.

Financial Safety and Regulations

• FDIC Insurance protects deposits in case a bank fails (up to $250,000 per account).

Regulatory Bodies

• Federal Reserve (Fed) regulates monetary policy.
• FDIC insures deposits and monitors financial institutions.
• Consumer Financial Protection Bureau (CFPB) protects consumers from fraud.

Prime Rate

• The Prime Rate is the interest rate banks charge their most creditworthy customers.
• When the Fed raises interest rates, the Prime Rate increases, and loans become more expensive.
• When the Fed lowers interest rates, the Prime Rate decreases, and borrowing becomes cheaper.

International Banking and the Global Economy

• U.S. Banks provide loans to foreign governments and businesses and support multinational corporations with foreign exchange and investment services.
• Challenges in international banking include foreign regulations and restrictions and political and economic instability in global markets.

Largest Banks in the World (as of 2024)

• JPMorgan Chase (USA) with $603.84B Market Cap.
• Bank of America (USA) with $323.97B Market Cap.
• Industrial and Commercial Bank of China with $273.30B Market Cap.

The Power of Saving & The Time Value of Money

• Saving $2,000 annually at 10% interest starting at age 23 results in nearly $1 million by age 67.
• If starting at age 36, saving $2,000 annually at 10% interest results in less than half that amount by age 67.

Impact of Delayed Savings

• Starting at 20 requires monthly savings of $33 for $1M by age 67.
• Starting at 25 requires monthly savings of $51 for $1M by age 67.
• Starting at 30 requires monthly savings of $109 for $1M by age 67.
• Starting at 40 requires monthly savings of $366 for $1M by age 67.