Get Ready to Take Charge of Your Finances

Checking Account & Debit Card Simulation Grade Level 7-9 Get Ready to Take Charge of Your Finances Time to complete: 180 minutes National Content Standards Family and Consumer Science Standards: 1.1.6, 2.1.1, 2.4.1, 2.5.4, 2.6.1, 3.3.2 National Council on Economic Education Teaching Standards: 10, 11 National Standards for Business Education Career Development: Economics: VII.1 Personal Finance: VI.2, VI.3-4 Objectives Upon completion of this lesson, students will be able to: Identify the functions of a checking account Describe the procedure of using checks and a debit card Demonstrate how to use all elements of a checking account Introduction Checking accounts are a common financial service used by many consumers. They can help to manage money and make paying bills more convenient. The funds are easily accessed through a check, an automated teller machine (ATMs), a debit card, telephone, or internet. Services and fees will vary depending upon the financial institution. People might use a checking account for the following reasons: Reduces the need to carry large amounts of cash Convenience useful for paying bills instead of cash or money order Written record of expenses keeps track of where money is spent on the check register and can act as a spending plan tool o The MontGuide, Using a Check Register, can be used as a reference. Available from Montana State University Extension Services http://extn.msu.montana.edu/ search for Using a Check Register A check is used at the time of purchase as the form of payment. It is a piece of paper pre-printed with the account holder s name, address, financial institution, and identification numbers. To complete the check, the account holder completes the amount, payee (to whom the check is being written), date, and signature. When a check is written for an amount over the current balance held in the account, the check bounces because of insufficient funds and is assessed a substantial fee by both the financial institution and the payee. Bouncing a check can harm a person s opportunity for future credit opportunities. A register is a place to immediately record all monetary transactions to keep a running balance of the account. All transactions should be recorded including written checks, ATM withdrawals, debit card purchases, deposits, fees, etc. A checkbook contains the checks and the register to track monetary transactions. ATM: Automated teller machines (ATMs) or cash machines are electronic computer terminals which offer automated, computerized banking where you can withdraw cash or deposit funds into an account. ATMs are accessed with an Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 1

ATM or debit card and a PIN. ATMs are usually free of charge for customers using his/her financial institution s ATM. Some ATMs charge a fee for use, and financial institutions may also assess a fee if a customer uses another banks ATM. To use an ATM insert the card into the slot, type in the PIN and perform the desired transaction. Keep the printed receipt to compare with that month s bank statement. Debit Card: A debit card is a plastic card which looks like a credit card, but is electronically connected to the cardholder s bank account for purchases. When a purchase is made, money is automatically taken from the designated account. Some cards are dual function cards for ATMs and debit cards, meaning one card performs both functions. Debit cards require using a personal identification number (PIN) to access the account to perform transactions. A PIN confirms that the user of the debit card is authorized to access the account. The card is used by swiping it through the store machine or entering it into the ATM. To authorize the purchase a PIN must be entered or the receipt must be signed. Pro s Convenient Small Can be used like a credit card Allows a person to carry less cash Does not allow overspending Con s Can lose track of balance if transactions are not written down Opens checking account up to credit card fraud Others can gain access to the cardholder s account if he/she finds the card and the PIN is known Endorsing a Check: To deposit a check, it must be endorsed. This means the person who receives the check must sign the back of the check to approve it for deposit. Ways to endorse a check include: Blank Endorsement anyone can cash or deposit the check after the check has been signed by the receiver of the check. Restrictive Endorsement more secure than blank endorsement because the receiver writes for deposit only and the account number to which the money will be deposited into above the signature. This allows the check to only be deposited. Special Endorsement the check can be transferred to second party if the receiver signs the back and writes pay to the order of (fill in the person s name). o This is also known as a two-party check. Making a Deposit: A deposit slip contains the account holder s account number and allows money (cash or check) to be deposited into the correct account. Checking account deposit slips are located in the back of the checkbook after the checks. Checks must be listed on the deposit slip individually. If more checks are being deposited than fit on the front of the deposit slip, write the extra checks on the back of the deposit slip and write the total amount of the checks from the back on the front where indicated. Deposits can be made at an ATM or with a bank teller. Cash back may be received if the deposit is made with a teller. The amount of cash received is not deposited into the account. The amount deposited must be recorded in the check register to keep the balance current. Writing a Check: To pay for items using a checking account, a check must be completed and given to the person or business as a form of payment. To write the check, the account holder must complete the following items on the check in order for it to Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 2

be accepted: date, payee (to whom the check was written), amount in numerical form and written out, and his/her signature. Immediately record the check into the check register. Check Clearing for the 21 st Century Act (Check 21) Prior to Check 21, a customer would write a check to pay for a service or product, and have several days before the money would transfer from the customer s bank account to the service provider s bank account. Now, because of Check 21, the check is sent electronically to the customer s bank and the money is withdrawn automatically, therefore, a person must have money in his/her account before writing the check. Check 21 is similar to the debit card process. Many stores are moving toward using this technology to avoid receiving bad checks. Debit cards can be used when money is not in the account, however the consequences will be determined by the consumer s choice of opting into an overdraft protection plan. Overdraft As a result of The Card Act (effective 2010), consumers have options regarding overdrafts for transactions made with their debit or ATM cards. An overdraft occurs when a consumer withdrawal from a bank account exceeds the available balance. Consumers must now choose to allow their depository institution to accept transactions which will exceed their available balance and be charged a $20-$30 transaction fee. Or, a consumer may choose to allow a transaction to be declined if there are not sufficient funds. However, debit card transactions may not clear the depository institution until the next business day depending upon how quickly a business processes its sales. For this reason it is important to know the account balance prior to making a debit card purchase. Monthly Statement: A statement is mailed monthly listing each monetary transaction and the current account balance. It shows the dates and transaction amounts, any interest earned (if applies), any applicable fees or charges, check identification (number, date, amount), and any withdrawals or deposits. Reconciling a Checking Account: The statement can be used to reconcile the account, which means to balance the checkbook register each month to the balance shown on the statement. To reconcile an account, start by checking to make sure every transaction listed on the statement matches the checkbook register. Place a check next to each item once it has been double-checked between the statement and register. Do this for both withdrawals and deposits. Subtract any fees or service charges from the register not already listed and write them down. Identify any outstanding transactions in the check register. These are the items which have not cleared through the financial institution and are not listed on the statement. List and add them up. Then start with the balance on the statement from the financial institution. Add any outstanding deposits. Subtotal the balance and outstanding deposits. Subtract any outstanding withdrawals. The total after doing this should be the same balance in the checkbook register. If not, check the math, look for missing check numbers, or double-check the statement. Reconciling the checking account is helpful because then the account owner knows the exact balance in the checkbook. Checking Account Safety: If a checkbook, ATM, and/or debit card gets lost or stolen, immediately report it to the financial institution and file a report with the police. If a checkbook is stolen and then reported, financial institutions generally do not hold the account holder liable for any fraudulent charges. If the ATM/debit card is reported within 2 business days, the cardholder is only liable for $50.00. If the cardholder waits longer, he/she could be liable for up to $500.00. However, this can vary depending upon the institution because some may not charge the account holder anything if the correct reporting steps were taken. Be sure to keep ATM/debit cards and checkbooks in a safe location. Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 3

In this lesson, students are introduced to checking accounts. Students learn about checking accounts by discussing the characteristics and practicing how to complete sample deposit slips, personal checks, endorsements, debit card and registers. The students practice reconciling bank statements to learn about the importance of keeping a correct balance. Students apply the information by completing a checking and debit card simulation. Students write deposit slips and personal checks, complete checkbook registers, read bank statements, and reconcile a checkbook. Body *Before the lesson Print and compile the Student Students will use the packet while the teacher goes through the Checking Account & Debit Card Simulation PowerPoint presentation 2.7.3.G1. 1. Ask students if they were in a grocery store at the check out line and the cashier asked them if they wanted paper or plastic, what would they say? a. Usually the phrase paper or plastic refers to the type of bag the customer prefers, but this phrase could refer to the type of payment the customer is using. b. How customer s pay for products such as their groceries is dramatically changing from paper cash to plastic debit cards. c. Tell students that today they will be learning about both options, paper and plastic, while learning about managing finances wisely by using a checking account. 2. Pass out one Student Worksheets and Instructions packet 2.7.3.E1 to each student. 3. Present the Checking Account & Debit Card Simulation PowerPoint presentation 2.7.3.G1. a. Slide 1 Title b. Slide 2 What is a Checking Account? i. Ask a student to refer to page 2 of their Student Worksheets and Instructions packet 2.7.3.E1 and read the definition of a checking account. c. Slide 3 Why Do People Use Checking Accounts? i. Ask students if they were going on a four day vacation what they would have to pay for. 1. Food, lodging, transportation and entertainment ii. Have students estimate the total cost of a four day vacation including all of the expenses and ask to share their estimated total vacation cost with the rest of the class. iii. Ask students if it would it be easier to carry around a large amount of cash to pay for all vacation expenses or a have a checking account that money can be taken from when needed? iv. Convenience is one of the reasons people use checking accounts. d. Slide 4 What is a Check? i. Ask one student to read the first characteristic of a check described on page 2 of Student e. Slide 5 Bouncing A Check i. Ask one student to read the second characteristic of a check described on page 2 of Student ii. Ask students how they can prevent bouncing a check. 1. If all transactions are recorded and the account is reconciled each month, individual can help prevent bouncing a check. f. Slide 6 Other Checking Components i. Ask one student to read the third characteristic of a check described on page 2 of Student g. Slide 7 ATM i. Ask students how acquiring additional fees when using an ATM can be prevented. 1. Use ATMs that are provided by the same financial institution their ATM card is sponsored by. Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 4

h. Slide 8 Debit Card i. Ask three students to read the characteristics of a debit card described on page 2 of Student i. Slide 9 To Use A Debit Card j. Slide 10 Pros and Cons - Debit Cards i. After reviewing the list of Pros and Cons, ask students if they can think of additional pros or cons of using a debit card. k. Slide 11 Endorsing A Check i. Instruct students to turn to page 3 of their Student Worksheets and Instructions packet 2.7.3.E1. ii. Ask one student to read the top paragraph and definition of endorse. l. Slide 12 Blank Endorsement m. Slide 13 Restrictive Endorsement n. Slide 14 Special Endorsement i. After the description of a Special Endorsement has been read, refer students back to the bottom section of page 3 of their Student ii. Read the directions aloud to all students. iii. Allow time for the students to practice writing all three endorsements at the bottom of the page. o. Slide 15 Worksheet Answers i. The answers to page 3 of the Student Worksheets and Instructions packet 2.7.3.E1 are shown. p. Slide 16 Making A Deposit i. Ask students to turn to page 4 of their Student Read the definition at the top of the page. q. Slide 17 25 Completing A Deposit Slip i. As each slide/step of completing a deposit slip is described on the PowerPoint presentation, allow time for students to refer to the example on page 4 of their Student Worksheets and Instructions packet 2.7.3.E1 to identify each step. ii. After slides 16-24 have been presented, instruct students to turn to page 5 of their Student iii. Read the directions aloud to all students. iv. Allow time for students to complete the deposit slip for Sally Smith. r. Slide 26 Worksheet Answer i. A completed deposit slip for page 5 of the Student Worksheets and Instructions packet 2.7.3.E1 is shown. ii. Read the question in the lower left corner of page 5 aloud to all students. 1. Why should an individual record all deposits in their check register? iii. Ask for student s response and allow time for them to record their answers in the question box. s. Slide 27 36 Writing A Check i. Instruct students to turn to page 6 of their Student Worksheets and Instructions packet 2.7.3.E1. ii. As each slide/step of writing a check is described on the PowerPoint presentation, allow time for students to refer to the example on page 6 of their Student Worksheets and Instructions packet 2.7.3.E1 to identify each step. iii. After slides 27-36, instruct students to turn to page 7 of their Student Worksheets and Instructions packet 2.7.3.E1 and read the directions at the top of the page. Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 5

iv. Allow time for all students to complete both checks and then ask the questions in the question box. 1. Why is good penmanship important when writing checks? a. To ensure the correct monetary amount is charged to the account holder. 2. What color pen should be used when writing checks? Why? a. Blue or black v. Discuss student s responses and allow time for all students to record the correct answers in the question box. t. Slide 37 38 Worksheet Answer i. Completed check numbers 302 and 303 are shown on the slide. u. Slide 39 Check 21and Overdraft i. Ask one student to read the paragraph about Check 21 on the bottom of page 7 of their Student ii. Go over the information that a consumer has a choice and may either opt in to be protected if they attempt a transaction with insufficient funds, or, they can opt out and the transaction will be denied. v. Slide 40 41 Debit Card i. As each section of a debit card is described, refer students to page 8 of their Student Worksheets and Instructions packet 2.7.3.E1 and allow time for students to find each part on the example debit card. ii. Read the question in the question box on the bottom of the page aloud to students. 1. Why is it important to sign the back of a debit card? a. If the card is not signed and a cashier allows purchases to be made, there is no comparison of signatures to ensure the customer is authorized to use the debit card. iii. Discuss students responses and allow time for students to write the correct answer in the question box. w. Slide 42 Checking Account Register i. Ask students to turn to page 9 of their Student ii. Have one student read the first paragraph on page 9 that described a checking account register. x. Slide 43 50 Check Register i. As each section/slide of a check register is described, refer students to page 9 of their Student Worksheets and Instructions packet 2.7.3.E1 and allow time for students to find each part on the example check register. ii. After slides 43-50 have been presented, have students turn to page 10 of their Student Worksheets and Instructions packet 2.7.3.E1 to view a completed September Check Register. iii. Read the questions on the bottom of the page in the question boxes aloud to students. 1. Why is it important to keep a running balance total in the far right column? a. To ensure there are sufficient funds in the checking account before writing a check, using a debit card or ATM. 2. During the month of September, did Sally ever bounce a check or overdraw her checking account? Why or Why Not? a. No she did not overdraw her checking account. This can be determined by viewing the balance column and seeing that all numbers are positive. y. Slide 51 52 Monthly Bank Statement i. Ask students to turn to page 11 of their Student Worksheets and Instructions packet 2.7.3.E1 and view the sample Bank Statement for the month of September. Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 6

z. Slide 53 Reconciling A Checking Account aa. Slide 54 58 Steps for Reconciling i. Ask students to turn to page 12 of their Student Worksheets and Instructions packet 2.7.3.E1. ii. As each step is described on the PowerPoint presentation, direct students to the correct spot on their sample check register, bank statement and reconciling pages. iii. Complete each step together as a class. bb. Slide 59 Checking Account Safety i. Ask students to turn to page 13 of their Student Worksheets and Instructions packet 2.7.3.E1. cc. Slide 60 Safety Continued dd. Slide 61 Questions? Conclusion 1. Take a few minutes to discuss with students what they learned. Key points include: a. Funds in a checking account are easily accessed through a check, ATM, debit card, telephone and internet. b. There are three types of endorsements that are written on the back of checks to deposit or cash the funds. c. A deposit slip is completed to deposit cash or checks into an account. d. There are nine items on a check that must be known when writing checks. e. There are six items on a debit card. f. A checking account register is used to record all transactions. g. Each month, individuals receive a bank statement that lists all account activity in the past month. h. Reconciling a checking account is an important step in managing finances. i. Report a lost checkbook, ATM, and/or debit card immediately. 2. Pass out one Checking Account & Debit Card Review Questions worksheet 2.7.3.A1 to each student. a. Instruct students to match the terms on the right with the definitions on the left. Assessment Students complete the Student Assessment 2.7.3.B1 Materials Checking Account & Debit Card Review Questions worksheet 2.7.3.A1 Student Assessment 2.7.3.B1 Answer Key 2.7.3.C1, 2.7.3.C2 Student Worksheets and Instructions packet 2.7.3.E1 Checking Account & Debit Card Simulation PowerPoint presentation 2.7.3.G1 MontGuide MT198703 Check Register System http://www.montana.edu/publications/ This MontGuide explains what a check register system, how to use it to track spending, and how to use it to follow a spending plan. About Checking http://www.aboutchecking.com This Web site offers information on checking accounts including a simulation showing how to write a check, complete a register, make deposits, and read bank statements along with a resource page. Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 7

Checking Account & Debit Card Review Questions 2.7.3.A1 Worksheet Total Points Earned 16 Total Points Possible Percentage Name Date Class Directions: Match the following terms on the right with the definitions on the left. Each question is worth 2 points. 1. A common financial service used by many consumers. They can help to manage money and make paying bills more conveniently. 2. A legal document that functions like cash. 3. Used to withdraw cash or make deposits. 4. Sign the back of this card in the authorized signature box. 5. Contains the account holder s account number and allows money (cash or check) to be deposited into the correct account. 6. Debit cards require using this to access the account to perform transactions. 7. All transactions including deposits, checks, debit card purchases, additional fees, and ATM use should be recorded here immediately after completion. 8. Bank statements are compared to the check register when the account. A. Reconciling B. Check C. Debit Card D. Checking Account E. ATM F. Check Register G. Deposit Slip H. PIN Family Economics & Financial Education May 2010 Get Ready to Take Charge of Your Finances Checking Account & Debit Card Simulation Page 8