G6 Bank System PDF

What is money? Why is it important in our daily lives? BARTERING COMMODITY MONEY LYDIA FIAT BITCOIN PAPER MONEY MOBILE APPS Money has evolved over thousands of years, and different forms of money have been used in different parts of the world. Bartering In the earliest civilizations, people wou...

What is money? Why is it important in our daily lives? BARTERING COMMODITY MONEY LYDIA FIAT BITCOIN PAPER MONEY MOBILE APPS Money has evolved over thousands of years, and different forms of money have been used in different parts of the world. Bartering In the earliest civilizations, people would exchange goods or services directly, without the use of money. For example, a farmer might trade some of their crops for tools. Commodity Money Commodity Money As trade became more complex, people started using certain commodities, such as salt, shells, or beads, as a form of money. The value of these items was based on their usefulness or rarity. Commodity Money Banknotes A banknote is a type of paper currency that is issued by a central bank or government. Banknotes are usually made from a combination of cotton and linen, which makes them more durable than regular paper. Banknotes typically have security features such as watermarks, holograms, and microprinting to prevent counterfeiting. Digital Money Today, much of the money we use is digital, meaning that it exists only in electronic form. People can use debit or credit cards, mobile payment apps, or online banking to transfer money from one account to another. BANK SYSTEM BANK LENDING INTEREST FEDERAL FUNDS RATE ECONOMY CHECKING ACCOUNT SAVINGS ACCOUNT FRAUD What is a bank? A bank is a financial institution that accepts deposits from customers and uses them to make loans to other customers. Banks make money by charging interest on loans and paying interest on deposits. They also provide other services, such as investment management, financial advice, and insurance. How do banks work? Banks work by taking in deposits from customers and using those deposits to make loans to other customers. Banks make money by charging interest on loans and paying interest on deposits. Banks also invest their customers' deposits in various financial markets to earn additional income. Services offered by banks: Deposits Banks offer different types of deposit accounts, such as savings accounts, checking accounts, and certificates of deposit (CDs). Deposits in these accounts earn interest, and customers can withdraw their money at any time. Loans Banks offer different types of loans, such as personal loans, car loans, and home mortgages. Loans allow people to finance their purchases and investments. Banks charge interest on loans, which is the cost of borrowing money. Credit Cards Banks issue credit cards to customers, which allow them to make purchases and pay for them later. Banks charge interest on any unpaid balance each month. Investment Management Banks help customers manage their investments, such as stocks, bonds, and mutual funds. Banks provide advice and guidance on how to invest wisely and grow their wealth. LENDING Lending is a critical function of the banking system. Banks take in deposits from customers and use that money to make loans to other customers. Lending helps individuals and businesses finance their purchases and investments, which drives economic growth. INTEREST Interest is the cost of borrowing money. When someone takes out a loan, they agree to pay back the borrowed amount plus interest. The interest rate determines how much interest the borrower will pay on top of the borrowed amount. Banks earn money by charging interest on loans and paying interest on deposits. FEDERAL FUNDS RATE The Federal Funds Rate is the interest rate that banks charge each other for overnight loans. The Federal Reserve sets the Federal Funds Rate, and changes in the rate can affect the interest rates that banks charge their customers. The Federal Funds Rate is an essential tool for the Federal Reserve to manage the economy. ECONOMY The banking system plays a crucial role in the economy. Banks help people and businesses finance their purchases and investments, which drives economic growth. The interest rates that banks charge on loans and pay on deposits can influence consumer spending and investment decisions, which can impact the overall health of the economy. CHECKING ACCOUNT A checking account is a type of deposit account that allows customers to write checks or use a debit card to make purchases. Customers can deposit money into a checking account and withdraw money as needed. Checking accounts typically do not earn much interest, but they offer easy access to funds. A debit card is a plastic card that is linked to a checking account. When a customer uses a debit card to make a purchase, the money is automatically deducted from their checking account. SAVINGS ACCOUNT A savings account is a type of deposit account that pays interest on the deposited funds. Customers can deposit money into a savings account and earn interest on their savings. Savings accounts typically have restrictions on how often customers can withdraw money, but they offer a higher interest rate than checking accounts. FRAUD Fraud is a serious problem in the banking system. Fraud occurs when someone uses deception or trickery to gain access to someone else's account or funds. Banks use various security measures, such as passwords and biometric identification, to protect against fraud. Customers should also take steps to protect their accounts, such as using strong passwords and monitoring their account activity regularly.