Lesson 5

Topic: Bank Accounts… Again - How to keep track of your money and manage your bank account. (This should be a review and extension of the grade 6 lesson on banks and bank accounts) Personal banking is one of the more important aspects of personal finance which is why there is more than one lesson on the topic.

Goal: To review the different types of bank accounts. For students to study different types of banking statements to determine what information is being given and why it might be useful.

Lesson Overview:

· Class discussion – What to students remember from last year about banks and banking?

· Video – May choose to re-show the two Grade 6 videos on banking and types of bank accounts.

· Classwork / Student work - Analyzing different types of bank statements, looking at online banking profiles. How to lessen bank charges when withdrawing cash. Review interest calculations using an online loan calculator.

· Wrap-up or Extension activity

Class discussion questions to see what students know/remember from Grade 6: What is a bank? Why do we need banks? What is a bank account? Why do we need them? How many students here have their own bank account? How do banks help us, How do they make money from us? What is a deposit, withdrawal? What are cheques and why are they used? Are they still used? How do people generally pay for things? (Cash, Cheque, etransfer, debit and credit cards. What is a debit card and how does it work? What is a credit card and how does it work?

Background Information/Lecture Material: Review background material on banks and banking in Canada (Grade 6)

Banks are institutions (heavily regulated by the government) that allow people to manage their money. In the past (100+ years ago) banks were seen as an institution for the rich and many average people felt they did not need bank accounts and dealt only with cash. In this day and age of increasing complexity, of rapidly expanding technology and population, it is now very difficult to survive without a bank account. Most employers these days rely on direct deposit into a bank account for employee’s wages instead of issuing a paper ‘paycheque’ as they did in the past. Many people rely on their debit or credit cards to make purchases and etransfers to transfer money – all services provided by banks. In fact during the Covid-19 pandemic, for a brief period many businesses refused to accept cash. Whether we will see cash as a means of payment disappear in the future remains to be seen, but the vast majority of monetary transactions these days are done electronically through a bank.

Banks make money in two primary ways. The first is by lending money. They lend people money to buy houses (in the form of a mortgage which is a loan specifically for houses) or to fund other purchases. They lend businesses money to run and expand their operations. A person or business who borrows the money usually pays it back over an extended period of time – the bank gives you a bunch of money now, and you pay it back later in installments. Then, on all this money they lend out, the banks charge interest (remember this term from grade 6?) Interest is basically a percentage amount extra over and above what you borrowed. So if you borrow $100 for one year at an annual interest rate of 10%, then at the end of that year you now owe the bank $110, so they made $10 from you by lending you that money. It doesn’t seem like much, but now imagine that the banks are lending out billions of dollars (which they are, if not trillions) and multiply that by 10% and they are earning a lot of money this way.

The second main way banks make money is from bank fees. Often if you use a bank machine that is not from your bank, an extra fee will be charged on that withdrawal. They also charge these fees to stores they deal with who use things like Interac. As bank users/customers, the main thing people use their bank for is transferring money, and most of these transfers are deposits or withdrawal to and from a bank account.

Most people who work for wages have their ‘paycheque’ direct deposited into their account, but twenty years ago a lot of people were still receiving a paper paycheque and having to head to the bank to deposit or cash it.

Examples of common deposits into a bank account:

• Paycheque (electronic usually)

• Cash or cheque deposit into bank machine

• Direct deposit from Canadian government (Tax refund, child tax credit etc..)

• Transfer from another person (usually electronic)

• Transfer within your own accounts (savings to chequing, investment account to chequing..)

• A refund of something you paid for with your debit card

Examples of common withdrawals

• Debit card purchases

• Pre-authorized payments (Phone plan, car payment, subscription, utility bills…)

• Electronic transfers out to other accounts

• Interac etransfer to another person

• Payments to credit card or loan accounts or bill payments

• Canadian government (taxes owing, garnished wages for child support etc..)

Video - **MSMM Video 7-5 – Bank Statements, what do they show?

Activity #1: Studying a bank statement. Look at a typical bank statement for ‘Joe Sample’ from Vancouver. What does the statement tell you? Using the bank statement answer the questions provided. One interesting thing to note is that a withdrawal from one account may mean a deposit into another account, for example when our banking client contributes money to his RSP account. Review answers.

*As an extension, the teacher can show other types of bank statements such as those for loans, mortgages and investments and discuss what these statements show.

*Look at bank charges, what are they for, how can students, as account holders, reduce the number of bank charges they incur?

Activity #2: Loan calculator – We have talked about loans and interest rates, but what does that really mean? Show students how to find and use an online loan calculator. Then have students use a computer to find their own online loan calculator (all major banks have them). Have them experiment with the calculator a little and then work through the questions on the included ‘loan calculator’ worksheet. What did they find out about payments, interest rates and amortization?

In-class/Homework Assignment/Extension Ideas:

· After the video, review the different ways of transferring money and decide whether each is a deposit into an account or a withdrawal from an account.

· Class discussion “Cash” – what is it and why do people like it? What are the advantages and disadvantages?

· What is a cheque? How to write a cheque? How to read a cheque? Why do we still have cheques?Do you think cheques will eventually disappear?

· What is an ATM machine? How do they work and what do we use them for? What are the benefits of ATM cards?

· What is an etransfer? How do they work? Why are they becoming so popular?

· Using an ATM card to purchase something at a store (called Point-Of- Sale or POS). How does this work? How many students in the class have their own ATM card?

· RSP statement, loan statement and mortgage statement. What information do they show, how are they related

· Look up banking and bank machine scams online and see what you come up with – we will go over findings next class. (Ex: Empty envelope scam, phishing…) How do they work?