Modern commercial banking, in its present form, is of recent origin. Though bank is considered to be an ancient institution just like money. Its evolution can be traced in the functions of money lender, the goldsmiths and the merchants. A bank has been often described as an institution engaged in accepting of deposits and granting loans. It can also be described as an institution which borrows idle resources, makes funds available to. It does not refer only to a place of lending and depositing money, but looks after the financial problems of its consumers. In simple words, banking can be defined as the business activity of accepting and safeguarding money owned by other individual and entities, and then lending out this money in order to earn a profit. This era is the age of specialization with the changing situation in the world economy, banking functions have broadened. Financial institutions which are shaped by the general economic structures of the country concerned vary from one country to another. Banks are among the most important financial institutions in the economy and are the principle sources of credit. 1.2 . Meaning of Banking Here are a few of definitions given by well known scholars:  Bank is a manufacturer of credit and machine for facilitating exchanges.  A bank is a person or corporation which holds itself out to receive from the public deposits and payable of demand by cheque.  Banks are institutions whose debts usually referred to as ‘Bank Deposits’ are commonly accepted in final settlement of other people debts.  A bank is an establishment which makes to individuals such advances of money as may be required and safely made and to which individuals entrust money when not needed by them for use. MU/CBE/ACFN BANKING PRICIPLES AND PRACTICES Page 6 All the above definitions are reflect the purpose of banks and function of banks that given by different scholars; however a single definition is needed to understand the corporate image of different banks in one definition; so that the definition provided below is concretely elaborate, what banking does it mean? In simple words, banking can be defined as the business activity of accepting and safeguarding money owned by other individual and entities, and then lending out this money in order to earn a profit Banking is defined as the accepting, for the purpose of lending, or investment of deposits, money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, or order. On the other hand a bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. It bridges the gap between the savers and borrowers. The provision of deposit and loan products normally distinguishes banks from other types of financial firms. Deposit products pay out money on demand or after some notice. Deposits are liabilities for banks.

1. Ten Sound Money
Management Principles for
Students
PPT Developed by Barbara O’Neill, Ph.D., CFP
Revised & presented by Jean Lown, Ph.D.,
Family, Consumer & Human Development, USU
Jean.lown@usu.edu

2. What are Your $ Questions?
 I can’t promise to answer all of them but
by knowing your questions before we
start I can adjust my presentation
 How many parents?
– Single parents?
 Utah Savers?
– Sign up for drawing
 PPT on FPW website
2

3. 3
Money Management Principles
 Are timeless and time-tested
 Apply to everyone
 Work well in up & down economies
 Help people grow wealthy over time
 Need to be taught in school

4. 4
1. Go For The Goal
 Goals provide a “why” for saving
 Use goals to develop action plans
 Break goals into benchmarks
 Make your goals SMART
– Specific
– Measurable
– Attainable
– Realistic
– Time-Related

5. 5
Invest in your Human Capital
 Get a solid education
– For career satisfaction
– For better health
– For higher lifetime earnings
 It’s OK to borrow for education
– There is an opportunity cost to taking too long to
earn degree
– Student loans are better than credit cards

6. 6
2. Time Is Your Friend
 Time: a young person’s biggest asset
 Compound interest is awesome
 For every decade that savings is
delayed, the required investment triples
 Example: $500,000 at 65; 10% yield
– Age 25: $ 79 per month
– Age 35: $ 219 per month
– Age 45: $ 653 per month
– Age 55: $ 2,141 per month

7. 7
More About Time
 Time diversification reduces investment
volatility
 The Rule of 72
– 72/interest rate = doubling period
– 72/doubling period = interest rate
 Advantage calulators

8. 8
3. Live Below Your Means
 Spend less than you earn
 Create a spending plan
– Income = Fixed Exp (including savings) +
Flexible Exp + 1/12 of Occasional Expense
 Distinguish needs from wants
 “Step-down principle”
 Automate savings so money isn’t spent

9. 4. Establish Emergency Fund
 Aka contingency fund
– Online savings accounts
• No minimum
• FDIC insured
• 4.5% (varies)
• Linked to checking account
– HSBC
– Emigrant
– ING & many others
9

10. 10
Pay Yourself First: Automate
Your Savings
 Tax-deferred employer plans
– Get full 401(k) match from employer
 Employer credit unions
 Savings bond purchase plans
 Mutual fund Automatic Investment Plan
 Direct stock purchase plans

11. Utah Saves
 http://www.utahsaves.org/
 Build wealth, not debt
 Saver Strategies
 Get out of debt
 Earned income tax credit
 Free income tax preparation
 Individual Development Accounts
11

12. 12
5. Buy Insurance According to
“The Large Loss Principle”
 Magnitude- not frequency- of losses
 Increase deductible to save $
 Spend premium dollars on large
potential losses:
– Liability
– Disability
– Destruction of home
– Large medical expenses
– Loss of household earner’s income

13. 13
6. Low Income Saver’s Credit
 Refundable tax credit up to
$1,000/person
 Contribution to retirement account:
IRA, 401(k), 403(b), or SEP
 Couple filing jointly AGI: $50k or less
 Single with AGI: $25,000 or less
 Sliding scale: 10-50% of contribution

14. 14
7. Repay Debt Quickly and
Borrow For Less
 Consumer debt ratio < 15% of net pay
 Consumer debt + housing < 50% of net
 High debt makes other problems worse
 Negotiate lower interest rates
 Always pay more than the minimum
 Avoid “perma-debt”
 Pay promptly to avoid late fees
 Family Life Center PowerPay analysis

15. 8. Earned Income Tax Credit
 Refundable tax credit for workers
15

16. 9. Vita tax prep
 Provided by USU accounting students
in Business building- starts Feb.
 AVOID instant tax refunds
– High cost loans (similar to payday loans)
 Auto deposit
 Split your refund
– Save a portion, pay debt, spend
16

17. 17
9. Buying House/Vehicle
 Don’t buy more house than you can
afford (Subprime mortgage meltdown)
– Don’t’ trust mortgage broker
 Don’t buy before you are really ready for
the financial commitment
 Buy new cars every 8-10 years or buy
“new used”

18. 18
Check Your Financial Health
 Take the Financial Fitness Quiz
– http://njaes.rutgers.edu/money/ffquiz/
 Least common practices
– Not having a will
– No written financial goals
– No written budget
– No net worth calculation

19. 19
Financial Education Resources
 Investing For Your Future
– Home study course
– http://www.investing.rutgers.edu/
 Money 2000 & Beyond
– http://www.rce.rutgers.edu/money2000
 RU-FIT financial independence training
– http://www.rce.rutgers.edu/ru-fit/
 USU Extension
– http://extension.usu.edu/

20. Spend Less,
Enjoy the Holidays More
 http://extension.usu.edu/htm/news/articl
eID=2361
 Start a UESP account for your kids
 Spend time with important people
 Avoid gift cards
– High fees, money can’t be saved
 Pay cash! Avoid debt.
20

21. Small Steps to Health & Wealth
 http://njaes.rutgers.edu/sshw/
 “This program is designed to motivate
consumers to implement behavior
change strategies that simultaneously
improve their health and personal
finances.”
21

22. 22
Personal Finance Magazines
 Kiplinger’s Personal Finance Magazine
– Kiplingers.com
 Money Magazine
– Money.com
– Money 101 on-line financial mgmt course
• http://money.cnn.com/pf/101/
• 23 lessons

23. 23
FCHD 3350 Family Finance
 Personal Financial Management
 DSS general education
 Fall & Spring semesters
– Live and on-line
 Don’t leave campus without this class!

24. 24
The Financial Checkup by Alena Johnson

25. 25
USU Family Life Center
 Very low cost financial & housing
counseling
 PowerPay Debt reduction computer
analysis https://powerpay.org/
 First time homebuyer workshops
 797-7224; 495 North 700 East, Logan

26. 26
Financial Planning for Women
http://www.usu.edu/fpw
 For women of all ages & knowledge
 Second Wednesday (except December)
– 12:30-1:30 in Family Life room 318
– 7-8:30 pm in Family Life Center
 Email list: jean.lown@usu.edu
– Monthly e-news & program info
 Sign up sheet for FPW
 PPT will be posted on the website

27. 27
Avoid Common Mistakes of Young
Adults
 Buying a house before you are ready
 Buying too much house
 Putting too much $ into vehicles
 Keeping a balance on your credit cards
 Waiting to invest for retirement until…
 Not considering the cost of kids
 Spending too much on eating out

28. 28
Closing Thought
“If it is to be,
it is up to me”
Comments? Questions? Experiences?