Chapter 4 - Financial institutions

Question 1

common mistakes in managing cash

Answer 1

• overspending as a result of impulse buying and using credit cards
• not having enough liquid assets to pay current bills
• using savings or borrowing to pay for current expenses
• failing to put unneeded funds in an interest-earning savings account or investment plan

Question 2

types of financial services

Answer 2

savings
- time deposits in savings and investment certificates
payment services
- automatic payments
- chequing accounts commonly called demand deposits
borrowing
- for the short/long term
other financial services
- insurance, investment, real estate purchases, tax assistance, and financial planning are additional services you may use

Question 3

types of financial institutions

Answer 3

Deposit type institutions
- Chartered banks
o Schedule 1 banks: full domestic service banks
o Schedule II banks: subsidiaries of foreign banks in Canada
o Schedule III banks: branches of foreign institutions
- Trust companies
- Credit unions
Non-deposit type institutions
- Life insurance companies offer insurance plus investment and retirement planning
- Investment companies offer a money market fund
- Mortgage and loan companies lend for home purchase
- Pawnshops make loans on possessions
- Cheque-cashing outlets charge 2-3%
- Banking via phone and online with most financial institutions

Question 4

pros and cons of online banking

Answer 4

PROS
- time and money savings
- convenience for transactions and comparing rates
- no paper trail for identity thieves
CONS
- potential privacy, security violations
- ATM fees can be costly
- difficulty depositing cheques and cash