Lesson Plan. Preparation

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1 Financial Institutions Banking and Financial Services Finance Lesson Plan Performance Objective Students will understand the purposes, similarities, and differences among types of financial institutions. Specific Objectives Students will identify the types of depository institutions. Students will identify the types of non depository institutions. Students will compare and contrast different types of financial institutions. Terms Financial institution a marketplace where borrowers and savers come together Bank a financial institution whose primary purposes are to take deposits from customers, invest, and lend money Depository institutions obtain deposits from customers and use that money to invest or lend as part of their business Deposit money placed in an account at a financial institution Depositor someone who makes the deposit Non depository institutions do not take deposits but make their money from selling services Deregulation occurred in the 1980s when restrictions were loosened on banks to allow for greater competition among different types of financial institutions Time When taught as written, this lesson should take approximately four to five class periods to complete. Preparation TEKS Correlations This lesson, as published, correlates to the following TEKS. Any changes/alterations to the activities may result in the elimination of any or all of the TEKS listed (c) Knowledge and Skills (1) The student evaluates the role of banking in the modern economy. The student is expected to: (D) compare and contrast the types of financial institutions such as commercial banks, savings and loan associations, credit unions, investment banks, and financial services companies. Interdisciplinary Correlations English English I (b)(1) understand new vocabulary and use it when reading and writing 1

2 110.32(b)(11) understand how to glean and use information in procedural texts and documents (b)(11)(B) analyze factual, quantitative, or technical data presented in multiple graphical sources Social Studies World Geography (c)(20)(A) describe the impact of new technologies, new markets, and revised perceptions of resources Occupational Correlation (O*Net Job Title: Financial Managers, Branch or Department O*Net Number: Reported Job Titles: Branch Manager, Consumer Loan Manager, Loan Servicing Vice President Tasks Recruit staff members and oversee training programs Plan, direct, or coordinate the activities of workers in branches, offices, or departments of establishments, such as branch banks, brokerage firms, risk and insurance departments, or credit departments. Network within communities to find and attract new business. Soft Skills Judgment and Decision Making Time Management Management of Personnel Resources Accommodations for Learning Differences It is important that lessons accommodate the needs of every learner. These lessons may be modified to accommodate your students with learning differences by referring to the files found on the Special Populations page of this website. Preparation Review and familiarize yourself with the terminology and website links. Review the lesson content and presentation slides. References Center for Financial Training. (2003). Banking and Financial Systems. Independence, KY: Cengage. and security/gramm leach bliley act federalreserveeducation.org/resources/coreconcepts/ 2

3 Instructional Aids Lesson Presentation Instructor Computer/Projection Unit Online Websites Introduction The main purposes of this lesson are to help students understand the following concepts: The purposes for different types of financial institutions The importance of credit unions The effects of deregulation of the banking industry in the 1980s. Ask students if they know that there are some financial institutions that do not take deposits of customers monies. Ask students if they know how different financial institutions try to protect consumers. Ask students if they know how to decide which type of financial institution is right for them. 3

4 Outline I. Two Main Types of Financial Institutions A. Depository 1. Obtain funds, or deposits, from customers, and use those funds to conduct business % held on reserve, remainder can be loaned to customers B. Non depository 1. Do not hold deposits 2. Sell services and charge fees for these services Ask students where they would put their money when they have it (for example, when they get a job). Almost all of them will probably name a bank that is most likely a branch of a national bank or a branch of a state bank. Ask them if they have heard of credit unions or savings and loans. II. III. IV. Types of Depository Institutions A. Commercial banks B. Savings and Loans/Mutual Savings Banks C. Credit Unions Commercial Banks A. Usually owned by stockholders B. Work with businesses and individuals C. For profit institution D. Offer services such as: 1. Checking and savings accounts 2. Loans 3. Investments 4. Insurance Savings and Loans A. Usually privately owned by depositors After going through the part of the lesson on depository institutions, pass out an index card to students and assign a student to be a recorder. Ask students to write down where they would prefer to put their money (for example, name an institution) and why. Then have the recorder write responses on the board, tallying each card. Discuss the results with students. Have students conduct an Internet search for Savings and Multiple Intelligences Guide Existentialist Interpersonal Intrapersonal Kinesthetic/ Bodily Logical/ Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual/Spatial 4

5 B. Most deposits from individuals C. Usually have FSB in the name D. Main business is real estate E. Many services same as commercial banks F. Mutual Savings Banks are similar, but state chartered V. Credit Unions A. Users must be members B. Non profit, so any profit must be distributed to members as possibly lower rates or fees C. Many services similar to commercial banks VI. Non Depository Institutions A. Insurance companies B. Trust companies/pension funds C. Brokerage firms and investment banks D. Loan companies E. Currency exchanges Loan fraud cases. Discuss one of the cases and explain why there are not as many savings and loans now as there were in the past. Emphasize that the main differences between depository and non depository institutions is with the deposits themselves. Depository uses the deposits partially to keep on hand for customer withdrawals and also to make loans to other customers. Non depository institutions use customer funds, which are not technically deposits, to invest in other ventures. VII. Insurance Companies A. Sell financial protection in the event of loss B. Premiums not considered as deposits C. Health, life D. Some policies have cash value, but still not considered deposits Ask students why an insurance company is considered a financial intermediary. VIII. Trust Companies A. Manage retirement or estate funds for a fee B. Pays interest on investments C. Funds invested for long term future growth Multiple Intelligences Guide Existentialist Interpersonal Intrapersonal Kinesthetic/ Bodily Logical/Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual/Spatial 5

6 IX. Brokerage Firms A. Paid commission to sell stocks and other securities B. May offer financial advice C. Customers money used to purchase stocks, bonds, and other securities X. Investment Banks A. Usually has large investors for clients B. Money invested in other businesses C. Profit from fees and interest earned on investments D. Wealth management is more of a total portfolio of wealth; investing is more about individual investment products Ask students if they have ever seen the E Trade commercials and if they understand what type of company it is. Research the company on the Internet. Mention other companies that are brokerage firms, many of which are online, and explain that the costs can vary depending upon if the business provides investment advice or not. XI. XII. Loan Companies A. Private companies, may charge higher interest B. May offer payday loans C. Borrowers usually higher risk Currency Exchanges A. Cash checks or sell money orders for a fee B. Usually in areas that may lack other financial services C. Fees may be higher due to lack of other services in the area Ask students if they have seen commercials advertising loans with no credit check. What types of companies are these? What is the catch if they do not check your credit? Do these companies take in deposits and pay customers interest? XIII. Regulators A. Board of Governors of the Existentialist Interpersonal Intrapersonal Kinesthetic/ Bodily Logical/ Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual/Spatial 6

7 Federal Reserve oversee statechartered banks and trust companies that are members of the Federal Reserve B. FDIC (Federal Deposit Insurance Corporation) 1. State chartered banks that are not members of the Federal Reserve 2. State chartered thrift institutions (former S & Ls) C. Office of the Comptroller of the Currency 1. Banks with National or N.A. 2. Federal Savings Banks and any remaining Savings and Loans, or thrift institutions D. National Credit Union Administration (NCUA) federally chartered credit unions XIV. Deregulation A. Great Depression few services, little competition, little money to lend B. 1980s more competition due to loosened restrictions C. Led to increased number of customers and deposits D. Also led to risky investments and loan practices by Savings and Loans Discuss the FDIC and its purposes. Ask them what the FDIC does to try to protect their money. Direct students to the following FDIC website: html. This site includes the EDIE, Electronic Deposit Insurance Estimator, calculator. Have students enter an institution name, type of account, and fictitious amounts to see a report of whether or not the account is covered and how much of the balance would be insured. Explain that this is a good way customers can plan for the future if they save money for long periods of time. To aid in students understanding of deregulation, discuss this concept as it relates to electricity and telephone service (for example, how there was one electric company for different parts of the country and how there used to be one major phone company). Give the students one minute to write down how many phone companies they can name. Then ask them what the benefits of Multiple Intelligences Guide Existentialist Interpersonal Intrapersonal Kinesthetic/ Bodily Logical/ Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual/Spatial 7

8 XV. Savings and Loans in Crisis A. 1980s deregulation led to risky investing in real estate and loans by Savings and Loans B. In addition, 1980s recession led to failure and fraud of many S & Ls C. Failed S & Ls: 1. Silverado Savings & Loan 2. Vernon Savings & Loan 3. Lincoln Savings & Loan 4. Midwest Federal Savings & Loan competition are. Also ask them how many financial institution names they can think of. What would these companies have to do to attract customers because many of them offer the same types of services. XVI. Banking Crisis of 2008 A. A major cause losses due to subprime mortgages 1. Subprime higher rate loans due to risky borrowers 2. Loans not repaid led to foreclosures B. Affected banks in foreign countries due to similar mortgage lending practices C. Led to bailouts of major banks due to massive losses Have students conduct Internet research in pairs by searching for causes of the banking crisis of Ask for responses and discuss what they can personally do in the future to avoid being adversely affected by such a crisis. Multiple Intelligences Guide Existentialist Interpersonal Intrapersonal Kinesthetic/ Bodily Logical/ Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual/Spatial 8

9 Application Guided Practice Pass out the Financial Institutions worksheet (included in this lesson) to the students. In pairs they can research each service offered and place an X in the boxes that apply. Some services will have more than one X. Then place a blank worksheet on a document camera, ask for student responses for each service, and record them, correcting students as necessary Use the Saver and Borrower Scenarios found at the following website, and conduct the activity on page 23 to familiarize students with the different types of transactions conducted by financial institutions, how loan terms are agreed upon, and how borrowers and savers generate income for the financial institution. Review the graphs at the following website, on page 29 and begin a discussion about why and how these charts are different between the two years displayed. Independent Practice Have students go to the Federal Reserve Education website listed above and create a set of flashcards with vocabulary the student learned from this lesson. Students can write an exit ticket stating one difference between three types of financial institutions. Summary Review Ask students the following questions on exit tickets or using a matching activity. Question #1: What is a main difference between depository and non depository institutions? o Answer #1: Depository institutions receive customer deposits while non depository institutions do not take deposits. Instead, they receive funds by charging customers fees for their services. Question #2: Name characteristics of a commercial bank. o Answer #2: They are the largest type of financial institution, are for profit, work with businesses and individuals, and offer a large variety of services. Question #3: What are some characteristics of savings and loans? o Answer #3: They are the smallest type of financial institution, usually privately owned, and deal mostly with individuals. Question #4: Name two characteristics of credit unions. o Answer #4: Their customers must be members, and they are non profit. Question #5: What is the FDIC? o Answer #5: The Federal Deposit Insurance Corporation insures deposits at state or nationallychartered banks and savings institutions that are not members of the Federal Reserve. Evaluation 9

10 Informal Assessment Any and all of the following can be used as informal assessments: Exit tickets with vocabulary Pair share activities Class discussion and participation Formal Assessment Savings and Loan Fraud Cases Assignment #1 Students are to conduct research on the S & L crisis of the 1980s and create a table listing three Savings and Loans, the primary reasons for the failure of the S & L, and what measures have been taken to prevent a repeat of these types of cases. Start with the but your research may lead to other web sites. Act Comparison T Chart and Summary Assignment #2 Students will conduct research on the Gramm Leach Bliley Act of 1999 as well as additional research on the Glass Steagall Act of They will compare and contrast the different provisions of each act and create a T chart displaying the results of their findings. Identify the similarities with one color and the differences with another color. Financial Institution Game board Assignment #3 In pairs, students are to create a game board using either poster board, flipchart paper, an open file folder, or a word processing template on the computer. If students use the computer, they can use the mailing templates (such as Avery) and select the business card template. The topic will be Financial Institutions Fun Facts. Game blanks will consist of facts pertaining to the various types of financial institutions and their characteristics. There should be a mixture of types of blanks. For example, some will contain questions, some will actually be blank, some will have consequences for incorrect answers (such as skip a turn, back two spaces, etc.) and some will have reward spaces (such as move ahead one space if you answer correctly, or take another turn). Enrichment Extension Ask students to think about what the world, their community, or their own lives would be like if there were no banks or other financial institutions. They should write a one page report addressing at least five areas that would be affected and how they would be affected. 10

11 Name Financial Institutions Directions: Research the services offered in the left column and place an X in the appropriate column of the financial institution that offers the service. There may be more than one X for the same service. Services Offered Banks Credit Unions Safe-deposit box Checking account Savings account Insured by FDIC Offers CDs Offers stocks Non-profit Sells mutual funds Owned by members Insured by NUAC Offers mortgages Offers credit cards Sells insurance services Savings & Loans Brokerage Firm 11

12 Name Financial Institutions Answer Key Directions: Research the services offered in the left column and place an X in the appropriate column of the financial institution that offers the service. There may be more than one X for the same service. Services Offered Banks Credit Unions Savings & Loans Brokerage Firm Safe-deposit box X X Checking account X X X Savings account X X X Insured by FDIC X X (since 2005) Offers CDs X X X Offers stocks X X X Non-profit X Sells mutual funds X X X Owned by members X X (some) Insured by NUAC Offers mortgages Offers credit cards X X X X X Sells insurance services X X X X 12

13 Financial Institutions Savings and Loans Fraud Cases Assignment #1 Student Name CATEGORY Content Accuracy All facts in the table are accurate % of the facts in the table are accurate % of the facts in the table are accurate. Fewer than 80% of the facts in the table are accurate. Attractiveness & Organization The table has exceptionally attractive formatting and well organized information. The table has attractive formatting and well organized information. The table has wellorganized information. The table's formatting and organization of material are confusing to the reader. Writing Mechanics Capitalization and punctuation are correct throughout the table. Capitalization and punctuation are correct throughout the table. There are one to two capitalization and/or punctuation errors in the table. There are several capitalization or punctuation errors in the table. Comprehension Student demonstrates exceptional understanding of topic. Student demonstrates adequate understanding of topic. Student less than adequately demonstrates understanding of topic. Student demonstrates little to no understanding of topic. Maximum Points Possible: 100 Student Points: 13

14 Financial Institutions Act Comparison T Chart and Summary Assignment # 2 Student Name CATEGORY Required Elements The t chart includes all required elements as well as additional information. Content Accuracy At least five accurate facts are displayed on the t All required elements are included on the t Four to five accurate facts are displayed on the t All but one of the required elements are included on the t Three accurate facts are displayed on the t Several required elements were missing. Less than three accurate facts are displayed on the t Grammar There are no grammatical mistakes on the t There is one grammatical mistake on the t There are two grammatical mistakes on the t There are more than two grammatical mistakes on the t Attractiveness The t chart is exceptionally attractive in terms of design, layout, and neatness. The t chart is attractive in terms of design, layout, and neatness. The t chart is acceptably attractive though it may be a bit messy. The t chart is distractingly messy or very poorly designed. It is not attractive. Identifications At least four similarities and differences are clearly identified. Three similarities and differences are clearly identified. Only two similarities and differences are clearly identified. Less than two similarities and differences are identified. Maximum Points Possible: 100 Student Points: 14

15 Financial Institutions Financial Institution Game board Assignment #3 Student Name CATEGORY Accuracy of Content All information cards made for the game are correct. Knowledge Gained Students could easily and correctly state several facts about the topic used for the game without looking at the game. Attractiveness Creativity Contrasting colors and at least three original graphics were used to give the cards and game board visual appeal. The students put a lot of thought into making the game interesting and fun to play as shown by creative questions, game pieces, and/or game board. Cooperative work The group worked well together with all members contributing significant amounts of quality work. Maximum Points: 100 Student Points: All but one of the information cards made for the game are correct. Students could easily and correctly state one to two facts about the topic used for the game without looking at the game. Contrasting colors and at least one original graphic were used to give the cards and game board visual appeal. The students put some thought into making the game interesting and fun to play by using textures, fancy writing, and/or interesting characters. The group generally worked well together with all members contributing some quality work. All but two of the information cards made for the game are correct. Students could easily and correctly state one to two facts about the topic used for the game without looking at the game. Contrasting colors and "borrowed" graphics were used to give the cards and game board visual appeal. The students tried to make the game interesting and fun, but some of the things made it harder to understand/enjoy the game. The group worked fairly well together with all members contributing some work. Several information cards made for the game are not accurate. Students could NOT correctly state facts about the topic used for the game without looking at the game. Little or no color or fewer than three graphics were included. Little thought was put into making the game interesting or fun. The group often did not work well together and the game appeared to be the work of only one to two students in the group. 15

Depository Institutions

1.7.3 Depository Institutions Grade Level 10-12 Take Charge of Your Finances Original Source: Shelly Stanton, Business Teacher, Billings West High School, Billings, MT Time to complete: 90 minutes National