Unit 2 Banking Grudge Match Questions PDF

Unit 2 Banking Grudge Match Questions 11-2.1 Checking/Savings Accounts|10-2.3 Beware of Banking Fees|11-2.5 Strategies to Save Why get an account with FDIC insurance? - This insures up to $250,000 in your bank account - Most large banks have this How can you access your checking account?...

Unit 2 Banking Grudge Match Questions 11-2.1 Checking/Savings Accounts|10-2.3 Beware of Banking Fees|11-2.5 Strategies to Save Why get an account with FDIC insurance? - This insures up to $250,000 in your bank account - Most large banks have this How can you access your checking account? - Debit card, check, ATM, online transfer, physical bank location What is direct deposit? When do you use it? Why use it? - So your employer can pay you directly into your bank account. - Don’t lose the paper checks - More efficient and time effective How often do you get a bank statement? - Monthly Why should you check your bank statement? - Fraud, check your balance, extra expenses How can you make your savings account secure? - Strong password, secure wifi Can you pay bills with a savings account? - Typically no What are savings accounts used to save for? - House, car, college, vacation… What is an interest rate? - Incentive for a person to lend money. (investing or banking) - A percentage of the money lent will be given to incentivize the lender to invest more money. Which has a higher interest rate? Savings or checking accounts? - Savings accounts - Less fluctuation and typical more money is entered into the account than taken out. - Checking accounts stay around the same and have lots of transactions (more fluctuation) harder for the borrower to make a stable profit. Why use a checking account if savings accounts have higher interest rates? - Checking accounts are easier to access - Savings accounts can be accessed 6 times per month depending on the bank List 3 banking fees - Maintenance, out-of-network ATM, overdraft protection Should you get an account with a maintenance fee? - No, this can be waived if you get a savings account, or maintain a minimum balance depending on the bank. How can you avoid an out-of-network ATM fee? - Use an ATM from your own bank - Use a prepaid debit card when traveling (limits amount of cash you are holding to prevent theft) - Pay using a debit or credit card What is the typical fee for an out-of-network ATM fee? - $3 per transaction Describe what happens if you have overdraft protection and you overdraw from your account - The transaction will be accepted - Your account will go in the negative - You will be fined a fee (typically $35 each time) Describe what happens if you have overdraft coverage and you overdraw your account - The transaction will be accepted - Money will be drawn from a linked account in increments of $50-$100 (typically from your linked savings account) - You will be fined each time money is drawn from the linked account Describe what happens if you have no overdraft protection and you overdraw from your account. - Your transaction will not go through (your card will be declined) - You may receive a fine for NSF (insufficient funds) When might it be a good idea to have overdraft protection? - When you have a steady income and you need to make sure all transactions go through. When might it be a bad idea to have overdraft protection? - When you do not have a steady income and fees can quickly draw you into debt. Why might someone opt in for overdraft protection if it is not in their best interest to do so? - The box could already be check when opening the account - Banker’s tell you it protects you from overdrawing your account (misleading statements) - People are unaware of the consequences What are 3 saving strategies we talked about in class? - 50/30/20 - Emergency fund - Multiple savings accounts - Pay yourself first - Set short, medium and long term goals Why save early? - More time for compounding interest to take effect Describe the 50/30/20 saving method (pretax or post tax money)? - After tax money - 50% goes to needs (housing, transportation, groceries) - 30% goes to wants (entertainment, going out to eat, hobbies) - 20% goes to savings (college, retirement, emergency fund) Why put 30% (50/30/20 saving method) to wants? Why not just save and spend on needs? - Could lead to impulse spending (illusion of choice) - If a 2 yo has two options they will choose between the two rather than not do anything. (Johnny you can wear these shoes or the red ones, which do you want to wear? Johnny will pick and wear shoes even if he does not like wearing shoes). - This is the concept of perceived choice. You can do this to yourself by giving yourself a budget on how much you can spend. It keeps you from indulging in all your impulse spending. Describe the Pay-Yourself-First saving method - Set aside a certain percentage of your pay to your savings account before paying bills or spending money. What is an emergency fund used for? - Medical emergencies, car accidents, unexpected expenses, urgent house repairs … How much should you save for an emergency fund? - 3-6 months of expenses Why not save for 5 years of expenses? - You can invest that money and make more on interest Why might it be beneficial to have 3 separate saving accounts? - Easier to save for multiple goals What are the time periods for short-term, medium-term and long-term goals? - 3 years What is the benefit to automating your savings? - More likely to set money aside for savings each month/stick to savings plan or goal