Chapter 10 - Banking Services Flashcards
What is Liquidity? What are the sources of liquidity?
Liquidity is your access to ready cash to cover short-term or unexpected expenses.
It includes cash, money in bank accounts that can readily be taken out, credit cards and credit lines.
How much should you have in your emergency fund?
Where is that money located?
You should have enough to cover 3-6 monthes of epenses in the emergency fund, which could be in a savings account (or other place where it can be taken out immediately when needed).
What is a depository financial institution?
What are the different types?
A finantial institution that accepts deposits (keeps your money) and provides loans to individuals and buisnesses.
The types are chartered banks, trust and loan companies, credit unions and caisses populaires.
What are trust and loan companies?
What are credit unions and caisses populaires?
Are these depository or non-depository finantial institutions?
Trust and loan companies offer the services of a bank, but also offer finantial planning services, such as administering estates. It can act as a trustee in the administration of a trust account.
Credit unions and caisses populaires are provincial co-operative instututions that are owned and controlled by their members.
These are all depository finantial instututions.
What is a non-depository finantial institution?
What are the types?
They are finantial institutions that do not offer federally insured deposit accounts.
These include finance and lease companies, mortgage companies, investment dealers, insurance companies, pawnshops, and more.
What are finance and lease companies?
What are motrgage companies?
What are investment dealers?
What are insurance companies?
What are mutual fund companies?
Finance and lease companies provide personal loans or leases to individuals.
Motrgage companies provide motgage loans to individuals.
Investment dealers provide investment banking and brokerage, they help you invest. (Wealthsimple Trade is one (I think))
Insurance companies sell insurance, they can sell life and health insurance and property insurance.
Mutual fund companies sell units to individuals and use the proceeds to invest in securities to create mutual funds.
What are NSF fees?
A fee the bank charges when one of your payment bounces back due to insufficient funds.
(Not sufficient funds)
What other services are offered by finantial institutions?
Checkign accounts (with or without interest)
Online banking
Interact e-Transfer
Credit cards
Safety deposit boxes
ATMs
What is a TFSA?
A TFSA (Céli in french) is a tax-free savings account.
This is a registered investment account that allows you to purchase investments with after-tax money without attracting any tax payable on your investment growth.
They have a contribution limit (6000$ last year), which is carried out to the next year if not used up.
Withdrawls are tax-free.
What are the main differences between a checking and a savings account?
Checking is for everyday transactions.
Checking has no restriction on # of transactions.
Checking usually does not pay interest.
Checking has debit/credit cards, savings usually do not.
Checking accounts rarely have fees.
Tansfers of frunds are not delayed for checking, they could be for savings.
Savings account usually have fees for transactions between accounts.
What are savings deposits?
What are term deposits?
Deposits that return interest, but usually have withdrawing fees.
Short or long term investments that offer more returns than savings deposits but less than guaranteed investment certificates as term investments are cashable.
What are GICs?
What are MMFs?
Guaranteed investment certificates. They are a savings alternative that has a fixed interest return and a fixed date. Example: guaranteed 1 year 2% placement. They have penalties for withdrawing early.
Money market funds are accounts that pool money from indiciduals and invest in securities that have short term maturities (1 year or less).
Why are certain deposits risky?
Risky deposits are made to sound appealing (high interest rate) but are often not insured (risky).
