DR. FILEMON C.

AGUILAR MEMORIAL COLLEGE

College of Business Administration
Golden Gate Subdivision, Talon 3, Las Piñas City

Course code and Title: FINE 2 / PERSONAL FINANCE

LESSON NUMBER: Module 3

Topic: BANKING and FINANCIAL INSTITUTIONS

Introduction:
When you choose a bank, you should consider convenience, cost and level of
service. When you think about handling your personal finances, among the things that
may come to mind are paying your bills, saving money to pay for the things you want
and maybe arranging for a mortgage to pay for a home or a loan to buy a new car. In
each case, there’s probably a bank involved in your plans.

Banks offer a wide range of checking, savings and investment accounts. They’re
also one of the first places to look when you need to borrow money. And they
increasingly provide access to national and even global financial networks that let you
get cash, have your pay check direct deposited or transfer money to pay bills or make
investments electronically. If your banking needs are like most people, you’re looking
for a checking account to handle your day-to-day finances and perhaps a savings
account.

Learning Objectives:

After this lesson, the student should be able to:

1. Analyze the unique role of banks in the financial system.

2. Value the importance of Banking in personal finance.

3. Demonstrate ethical standards by being honest and respectful.

Pre-Assessment:

 Instruction: Write your answer in ½ sheet of paper or in a document

file.

1. Enumerate 3 importance of banking and 2 types of financial institutions.

 1

Lesson Presentation:

What is banking?

- is defined as the business activity of accepting and safeguarding money

owned by other individuals and entities, and then lending out his money in order to
conduct economic activities .

Banks - serve as the principal caretaker of the economy’s money supply, and
along with other financial intermediaries, provide important source of funds. Many
banks also offer added conveniences:

 Direct deposit – is a payment option where your funds are electronically

transferred to your checking or savings account. Salaries and tax refunds
are examples of payments commonly made through direct deposit.
 Bank cards – banks offer bank cards so you can use automated teller
machines ( ATM’s )
 Credit cards – linked to your bank account include a line of credit that you
can use in an emergency.
 Overdraft privileges - you can be sure that all the checks you write will be
paid if you have overdraft protection on your account.
 Online Banking - many banks offer online banking on the bank’s internet
website, where you can check account information, transfer money, and
even pay your bills.

What you need to apply?

Banks make it easy to open basic accounts like checking and savings, if
you can provide what they require.

You’ll need:

 Bank Account Eligibility - make sure you’re eligible to open a bank

account. You need to be at least 18 years old to open an account.
However, you can open a joint account as a minor with a parent or legal
guardian as an account co-owner. Some banks do offer accounts tailored
for minors. These accounts allow both the minor and the adult to manage
the account, to teach the minor owner about banking.

 Money to deposit – when you open a bank account, you’ll often need to
make an opening deposit. This deposit amount will vary based on the
bank and account type. Many checking accounts require a deposit of at
least P 5,000.00 and some may require a minimum deposit amount to
avoid fees.

 Identification – banks require you to have some form of identification.

Documents such as any government ID’s and photos.
  Signature - the bank will ask you to sign a signature card, which they use
to identify your handwriting when you cash a check or require other bank
services

What is Financial Institutions?

- are referred to as a company that deals in all types of finance-

related businesses.
Financial institutions work like banks in some ways. They give
loans and advances to the customers and also set a platform for the
customers to do some investments. The customers get exciting offers and
returns from them and therefore these institutions are gaining popularity. It
also provide consultancy services to the clients on their investments
related to the financial markets where the huge amount of risk is involved.
Moreover, the customers who are handing over their hard-earned monies
to such institutions should check for the history and origin of this financial
institution.

Types of Financial Institutions

 Depository Institutions: Financial institutions that accept deposits from

individuals and provide loans

- Commercial banks – financial institutions that accept deposits

and use the funds to provide commercial and personal loans

- Savings institutions - financial institutions that accept deposits

and provide mortgage and personal loans to individuals

- Credit unions - nonprofit depository institutions that serve

members who have a common affiliation

 Nondepository institutions: Financial institutions that do not offer

deposit accounts but provide various financial services.

Non depository institutions are not banks in the real sense. They
make contractual arrangement and investment in securities to satisfy the
needs and preferences of investors. The non-depository institutions
include insurance companies, pension funds, finance companies and
mutual funds.

- Finance companies – nondepository institutions that

specialize in providing personal loans

- Insurance companies – are the contractual saving

institutions which collect periodic premium from an insured party and in
return agree to compensate against the risk of loss of life and properties.
 - Pension funds - are financial institutions which accept
saving to provide pension and other kinds of retirement benefits to the
employees of government units and other corporations.
Pension funds are basically funded by corporation and government units
for their employees, which make a periodic deposit to the pension fund and
the fund provides benefits to associated employees on the retirement. The
pension funds basically invest in stocks, bonds and other type of long-term
securities including real estate.

- Mutual funds - they are the associations or trusts of

public members and invest in financial instruments or assets of the
business sector or corporate sector for the mutual benefit of its members.

Banking Services offered by Financial Institutions

 Checking services
- Checking account is a deposit account with a bank or other financial firm
that allows the holder to make deposits and withdrawals.

 Credit card financing

- funding allows an individual or business to use a readily available source of
funds, though the funds are being borrowed and, thus, carry an interest rate.

 Debit card
- is a payment card that deducts money directly from a consumer's checking
account to pay for a purchase. It eliminate the need to carry cash or physical
checks to make purchases directly from your savings.

 Safety deposit box

- A box at a financial institution where a customer stores valuables such as
documents or jewelry

 Automated teller machines ( ATM’s )

- Machines where individuals can deposit and withdraw funds any time of
the day

GENERALIZATION

Banking is not only about saving money, it's also about managing money.
Opening an account is a smart move - it means that you can access a service that helps
you control your money, and which may help you borrow at some time in the future, if
you need to do so. Saving can be a major challenge. Especially when you consider paying off
debt and planning for retirement.

APPLICATION

 Prepare and Develop Personal Finance Plan.

EVALUATION

Copy and answer. This can be handwritten or typewritten then upload your answer to
your Google Drive folder in word, pdf, or jpeg (picture) format

 What is the important role of banking in personal finance?

REINFORCEMENT

Instruction: Write in 1 whole sheet of yellow paper then upload your reinforcement to
your Google drive folder in word, pdf, or jpeg (picture) format

1. Create a personal cash flow statement measures your cash inflow (money you earn)
and your cash outflow (money you spend) to determine if you have a positive or
negative net cash flow for week 4.

Online resource:
https://www.educba.com/financial-institution/
https://smartasset.com/checking-account/what-do-you-need-to-open-a-bank-account
https://www.assignmentpoint.com/business/finance/non-depository-institutions-of-financial-institutions.html

Personal Finance 2nd edition, Jeff Madura, 2017 Pearson Education

Investment Management with Personal Finance, 2014-2016 edition, Lawrence J. Gitman