Banking &Investing

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Banking & InvestingWelcome to Ally Wallet Wise

We make decisions about money every day, but sometimes it’s hard to know if we’re doing so wisely.

Issues such as credit, household budgets, banking and investing, and buying and insuring a car can be challenging. That’s where Ally Wallet Wise can help. We’ve created the curriculum to help take the mystery out of these important topics, and provide answers that can help you make good decisions about your money.

Ally Wallet Wise is divided into four different workbooks: Budgeting, Banking & Investing, Credit and Automotive. In this workbook you will learn more about Banking & Investing. The section reviews the basics of saving and investing your money and offers tips and resources for the entry-level investor.

This workbook can be used in a number of helpful ways:

• As an introduction to those who don’t have a bank account or want to know more about investing

• As a refresher for those who want to reacquaint themselves with the many aspects of these important financial services topics

• As a self-study guidebook

Throughout this workbook you will find:

• Key Terms

• Exercises that help explain specific concepts

• Review Questions

• Helpful Resources – numbers to call and websites to visit for more information

• Stories that illustrate how the information in these pages can impact all of us, every day

If you learn just one way to make better decisions about your money, this workbook will have been a success. We hope that by reading and using this workbook, you will be more knowledgeable and better prepared when making banking and investing decisions. Also, visit Allywalletwise.com for additional resources and information.

Note: The examples used in this workbook are for illustration only and may not accurately reflect any available transactions. This workbook is a general overview of points and principles you may want to consider as you build your money management skills. Only you can decide what is best for you. Ally makes no representations that this workbook is appropriate for your situation, and Ally takes no responsibility for the decisions you make. This workbook does not offer tax, legal or investment advice. You should consult a professional advisor for advice on those topics.

Banking and InvestingFinancial institutions are adapting to consumer needs and the ways today’s consumers want to bank and invest. There are many new ways to bank and invest and new tools available that make it easier. This section takes a look at banking and investment products and services and ways to access them. After completing this section of the workbook, hopefully you will feel more knowledgeable when banking and investing.

Why bank?It used to be that banks were the only places a consumer might go to handle certain types of transactions involving money – such as cashing a check or getting a loan. But today, non-banks offer these services too. You can find cash-checking operations and payday loan providers in many neighborhoods. While operations such as cash-checking services may offer convenience, there are good reasons to conduct traditional banking business with an FDIC-insured bank.

Safety – Money deposited in an account with an FDIC-insured bank is safe from theft, loss and insolvency of the bank, up to the limits of FDIC insurance.

Convenience – You can get money quickly and easily. For example, a direct deposit service available through most banks permits the direct deposit to your account of recurring payments, such as your salary. Using direct deposit saves you time and allows you quicker access to your money. Funds that are electronically deposited in your account are available sooner than if you deposited a check.

• Youcanalsouseautomatedtellermachines(ATMs) to get fast access to your money. Most ATMs are available 24 hours a day, seven days a week. You can also use your bank’s debit card to make purchases instead of using cash. Note: if an ATM card is not also a debit card, the ATM card cannot be used to make purchases directly.

Cost – Using a bank is probably cheaper than using a check-cashing service to cash your check or pay bills.

Security – The FDIC insures deposits up to $250,000 per depositor, per insured bank. This means that the FDIC will return customers’ money

up to this limit if a bank closes and cannot give its customers their money.

Making basic banking decisions How do you know which financial institution is right for you? Here, we’ll review some common options and review the pros and cons of the various choices. This will help you determine if a product or service makes sense for you and your financial plan.

Types of banks

Although there are many types of financial institutions that people commonly call “banks,” there are some differences among them.

Retail Bank: Financial institution that offers a variety of banking services, including accepting deposits and lending. At FDIC-insured banks, accounts are federally insured by the FDIC for up to $250,000, per depositor, per insured bank.

Credit Union: Not-for-profit financial institution owned by its members. Savings are federally insured by the NCUA (National Credit Union Association) for up to $250,000 per depositor.

Savings and Loan (sometimes called “Thrifts”): Bank that specializes in savings accounts and mortgage loans. At insured Savings and Loan institutions, accounts are insured by the FDIC for up to $250,000 per depositor.

Direct Bank: Often called an Internet or online bank, this type of bank may not have any physical (brick-and-mortar) locations. At FDIC-insured direct or online banks, accounts are federally insured by the FDIC for up to $250,000, per depositor, per insured bank. Because Internet banks don’t have many of the costs associated with running physical locations, they may be able to offer better terms or rates on deposits and loans. Although most banks are not Internet-only banks, most do offer the convenience of online banking.

Which type of bank is best for you? While many financial institutions will offer gifts and other incentives to attract your business, it’s important to consider more critical issues when choosing a bank.

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Which type of bank is best for you?

Types of checking accountsA checking account is a deposit account that lets you write checks to pay bills or make purchases. The financial institution takes the money from your account and pays it to the person or company named on the check. Generally, banks offer different types of checking accounts including free/low-cost checking, regular checking and interest-bearing checking. Which is right for you?

As you examine your banking choices, consider the following questions:

Are its deposits insured? This is the best way to be sure your money is protected.

Is it convenient? This can mean it has a convenient physical location or is accessible via the online tools you use most often (such as a computer or smartphone). Look for a bank that

Free/low-cost checking If you do not plan to write many checks, a free or low-cost checking account might be right for you. However, there may be a limit to the number of checks you can write in a month without being charged a fee.

Regular checking With a regular checking account, there is usually a minimum balance required to waive the monthly service fee. This type of account usually offers unlimited check-writing privileges.

Interest-bearing checking With these accounts, you sometimes have to maintain a high minimum balance in order to earn interest and avoid fees. The minimum balance is usually at least $1,000. There are also different interest-bearing accounts, one of which is a negotiable order of withdrawel (NOW) account.

Check BasicsBefore writing a check, make sure the money is available in your bank account. After the check is written, write the amount paid in your checkbook register. The register allows you to track your current balance. It has fields for the check number, date, description of transaction, credit (+ money put into your account), debit (- money taken out of

does business when and where you feel most comfortable. Consider a bank with extended office hours or 24/7 customer service by phone or online.

Does it cater to customers like you? Look for a bank that spends time trying to come up with better ways to serve customers in your particular financial situation with your particular needs.

the account) and balance. After you’ve balanced your checkbook, it’s important to reconcile the account. This is done by comparing your monthly checking account statement to your checkbook register.

Keeping track of your account balance helps you avoid fees and other penalties resulting from bounced checks. Most banks give you the option to receive email or text alerts that electronically remind you of your balance. These are generally free and a great way to stay connected to your budget.

If you’re opening your first checking account, ask an employee of the financial institution or a wallet wise friend or family member to show you how to write a check, complete a deposit slip, balance your checkbook and reconcile your monthly account statements. Most financial institutions will also provide instructions with your monthly statement that show you how to balance your checkbook.

Banks vs. check cashing servicesEven though banks may charge monthly fees, it is usually cheaper to use a deposit account at a bank than a check-cashing service.

Other benefits of banks include:

• Convenience of Internet banking with access to your accounts and information 24 hours a day, seven days a week.

Why open a savings account? There are many good reasons. Some people use savings accounts to prepare for costly events, such as a college education, wedding, family vacation or down payment on a home.

Many financial experts recommend maintaining an emergency fund to cover eight to 12 months of living expenses. Using a savings account to create that fund can be an easy way to start the process.

There are many types of savings accounts, and learning about them can help you make the right choice for your financial goals.

• Traditional Bank Savings Account – An account that gives you ready access to your money. Typically, traditional savings accounts bear the lowest interest rates of any savings account. There may also be a limit on the number of withdrawals you can take from the account each month.

• Online Bank Savings Account – This account is similar to a traditional bank savings account, but is offered by a direct or online bank that does not have physical bank locations. Such accounts sometimes bear higher interest rates than traditional bank savings accounts.

• Money Market Account (MMA) – An account that allows you to earn interest on your money but limits the number of transactions you’re permitted each month (such as check writing, debit card transactions or online transfers). You may or may not be required to keep a minimum balance.

• Using a bank account responsibly can help you establish a positive banking relationship, which may be helpful if you apply for a loan in the future (for example, when buying a car).

• Makes it easier to save money for the future.

No matter which type of savings account you choose, it’s important to remember certain principles of wise saving.

First, start with a goal in mind. Whether you’re saving for retirement, a house, a new car or a dream vacation, creating a picture in your mind of your objective can help you stay true to your savings goal.

Next, take advantage of any system or program that will help you reach your savings goal. For example, does you employer offer direct deposit? Consider setting it up so that 5 or even 10 percent of your paycheck goes directly into your savings account.

Finally, save or invest bonuses and tax refunds instead of spending them.

The basics of savings accountsA savings account is an account where you can deposit money to save for a purchase or as a reserve in case of an emergency.

Tips for opening a checking or savings account Request written information about the accounts you’re considering. The Truth in Savings Act gives you the right as a consumer to get key terms of an account in writing before opening the account.

When evaluating the cost of having a checking or savings account, it’s important to know the fees the bank may charge. The following are fees that may impact your decision in choosing a bank. Keep in mind that not all fees are bad fees, so understanding how and when you may be charged is important.

•Service or Maintenance Fee – Fee charged for maintaining an account with a financial institution.

•Overdraft or Insufficient Funds Fee – Fee charged if you don’t have enough money in your account to cover the checks you have written or debit card charges you have made.

•Stop Payment Fee – Fee charged if you request to have payment on a check stopped.

•ATM Fee – Fee incurred for using another financial institution’s ATM.

Use the checklist for choosing a bank and a bank account on the next page to help you make the best decision.

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Checklist for Choosing a Bank or Bank Account

(If the institution is a Credit Union, confirm that you are eligible to join.)

BANK 1 NAME/ACCT. TYPE BANK 2 NAME/ACCT. TYPE BANK 3 NAME/ACCT. TYPE

BANK INFORMATION

Does the bank offer the services I need?

Convenient branches and ATMs?

Bank hours?

Do bank employees speak my language?

Is it insured by FDIC/NCUA?

ACCOUNTS

Requirements for opening an account?

CHECKING ACCOUNTS

Minimum opening balance?

Minimum monthly balance?

Fees?

Fee waivers available?

Number of withdrawals per month without fee?

Earns interest?

Deposit hold times?

OVERDRAFT PROGRAMS

Low balance alerts offered?

Overdraft fees?

Link to savings account to cover overdrafts?If so, is there a fee?

SAVINGS ACCOUNTS

Minimum opening balance?

Minimum monthly balance?

Annual percentage yield (APY)?

Fees?

Fee waivers available?

Withdrawal limits per month?

Services available?

AUTOMATED TELLER MACHINE (ATM) CARDS

Fees?

Fee waivers available?

Location/number of ATMs?

DEBIT CARDS

Fees?

Fee waivers available?

Rebates or bonuses for use?

Location/number of ATMs?

Debit card transaction requirements or limits?

MOBILE/ONLINE BANKING

Is it available?

Transaction types and limits?

Fees?

Fee waivers available?

OTHER INFORMATION

TOTAL MONTHLY COSTS

TOTAL ANNUAL COSTS

Credit cards and debit cardsOne advantage of being a bank customer is that you have access to convenient payment tools. Credit cards and debit cards may be used to make payments in a wide variety of settings and can be used for anything from a cup of coffee (subject to minimums set by vendors) to making large purchases like televisions or computers. In this section, we’ll look at credit and debit cards and explain how they work.

Credit cards are discussed more in depth in the Credit section of Wallet Wise, but here we will provide a comparison to debit cards.

Credit Cards A credit card is a payment device issued by a financial institution that allows you to make a purchase when you don’t have cash on hand. Borrowing limits for the card are pre-set by the issuing financial institution based on the cardholder’s credit rating and other factors such as employment or educational status.

Some issuers charge an annual fee to cover account servicing costs. The card’s terms and conditions and any additional features are outlined in the credit card agreement.

Some credit card companies have a “grace period” for your purchases which is the number of days you have to pay your bill before finance charges begin to add up. After that, the balance due must be paid in full or paid down in monthly installments of principal plus interest.

It’s important to remember that credit card interest rates may be substantially higher than the rates on other types of consumer loans. When making purchases with a credit card, think carefully about whether you plan to pay off the amount immediately at the end of the month. If you’re planning to pay only a portion at the end of the month, then how long it will take to pay the rest off?

While credit cards are convenient for when you do not have cash on hand, they can be expensive if you charge more than you can afford to pay back. Try to avoid making purchases on your credit card if you will be unable to pay the balance in full at the end of the billing period.

Why Use a Credit Card?

• Shop online: Many online stores require you to use a credit card when you shop online (rather than a check or cash).

• Rent a car: Many car rental agencies require a credit card.

• Build a credit history: While you may not want to borrow money today, someday in the future borrowing may be in your plans and your potential lender will want to know your credit history. Having a credit card that is used responsibly is a good way to build a credit track record.

• Enjoy rewards: Many credit card companies offer rewards to their cardholders based on amounts charged.

Credit Card Pitfalls

• Overspending: Although credit cards allow you to buy now and pay later, this can be expensive if you charge more than you can afford to pay back. To avoid interest, pay your balance in full each month.

• Interest: When you don’t pay your balance in full, most credit card companies will charge interest on the unpaid balance.

• Fees: Credit card fees are likely to include fees for paying late and going over the credit limit. Some cards also have annual fees.

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Credit and debit cards (cont.)

Other bank services

Automated teller machine (ATM) cardsAn ATM card allows you to make deposits and withdrawals from your checking and savings accounts. You can usually check your account balance, print statements, and transfer funds between accounts. Some ATM cards can even be used in stores that accept ATM cards in your bank’s network. It works just like a debit card, but is not as widely available.

Most ATMs are available day and night, are easy to use, convenient and frequently located not only in banks but in many other retail outlets and businesses. Check your bank or financial institution’s ATM card rules to see if there are fees associated with ATM withdrawals within or outside your bank’s ATM network. When using an ATM outside your bank’s network, fees are often assessed. You can be charged a fee by your bank and the bank that operates the ATM. The charges may range anywhere from $1.50 to $4 or more per transaction.

If you anticipate needing access to an ATM often, a wise idea is to look for banks that give you access to a wide network of ATMs or ones that will reimburse your fee for using an out-of-network machine. ATM fees can add up quickly!

Keep in mind that a debit card can also be used as an ATM card, but it’s also possible to have an ATM card that is only used for ATM withdrawals and is not linked to an account to make actual purchases. Talk to your bank about which card is right for you.

Debit Cards A debit card – also called a bank card or check card – gives account holders access to their funds electronically. Debit card holders can obtain cash at ATMs or by conducting a cash back transaction at a participating merchant. Debit cards with MasterCard or Visa logos are accepted in most retail establishments.

Unlike a credit card, a debit card doesn’t let you borrow money. The debit card is linked directly to your bank account, and the money you spend via the debit card is deducted from the account at the time of use. Because the debit card is linked to your bank account, you will be asked at the point of purchase to input a Personal Identification Number (PIN) to authorize the deduction.

Why have a debit card? • Convenience: Debit cards are widely accepted

by both traditional and online retailers. Debit card purchases are also free of finance charges.

• Shop online: Most online retailers allow you to use a debit card when you make purchases, the same as a credit card.

• Avoid overspending: While credit cards let you borrow, a debit card limits your spending to the money you have in your checking account. Some accounts will allow you to go below a $0 balance and then charge you fees. See the section on overdraft protection below for more details.

Debit Card Pitfalls.

• Youcan’tbuildacredithistorybyusingadebit card, since you aren’t borrowing and repaying money – just accessing money you already have. Some companies, such as rental car firms, will not take a debit card and insist on a credit card.

• Inthecaseofdebitcardfraud,mostofthetime you will only be responsible for $50. You may, however, be responsible for more if you do not exercise reasonable care in safeguarding your card. Examples of not appropriately safeguarding your card include sharing your PIN or not notifying your bank of unauthorized transactions immediately.

An overdraft occurs when you spend more money than you have available in your checking account. Generally, banks cover your overdrafts in one of two different ways:

• Standardoverdraftpractices.Yourbankmaycover your transaction for a flat fee of about $9 to $35 each time you overdraw your account. This price varies from bank to bank.

• Overdraftprotectionplans.Yourbankmayoffer a line of credit or a link to your savings account to cover transactions when you overdraw your account. These overdraft protection plans may be less expensive than their standard overdraft practices.

There are now rules designed to protect consumers in the event of an accidental overdraft when using a debit card. These regulations exist to make the process more clear and uncomplicated for the consumer.

• Inthepast,somebanksautomaticallyenrolledyou in their standard overdraft practices for all types of transactions when you opened an account. Now, your bank must obtain your permission to apply its standard overdraft practices to everyday debit card and ATM transactions before you can be charged overdraft fees.

• Ifyoudonotoptin,yourbank’sstandardoverdraft practices won’t apply to your everyday debit card and ATM transactions. That means that transactions may be declined if you use your card when you don’t have enough money in your account.

• Ifyouoptin,youcancancelatanytime.Ifyoudo not opt in, you can do so later.

• Thissystemofoptinginmaynotcoverchecksor automatic bill payments that you may have set up for paying bills, such as your mortgage, rent or utilities. Talk to your bank about your options for these types of payments.

Would you pay almost $30 for a cup of coffee? That happened to me when I used my debit card to buy my morning coffee and I was not aware that I didn’t have enough money in the account to cover the cost.

I had to pay an overdraft fee of $25 on top of the cost of the coffee. Now I’ve researched overdraft protection plans so I can choose one that fits my lifestyle and keeps me from paying extra for my purchases.

Understanding overdrafts

Other resourcesIf you would like to research additional banking options and information, you may find the following websites helpful:

MyMoney.gov: www.mymoney.gov

FDIC (Federal Deposit Insurance Corporation): www.fdic.gov

Money Smart: An Adult Education Program. www.fdic.gov/consumers/consumer/moneysmart/index.html

NCUA (National Credit Union Administration): www.ncua.gov

Becoming Wallet Wise

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Ally Wallet Wise

Investing

Introduction to investing

Why invest? Investing gives you the opportunity to earn more for your money than you might in a standard savings account. While we’ve already discussed the different types of savings accounts that may pay interest – and that will grow your money – investing has the benefit of potentially offering even larger returns.

It is important to remember that investing involves the risk of loss of the entire amount invested. Unlike a savings account, investments are not insured by the FDIC, so you can potentially lose all or a portion of your money. It’s important to understand both the risks and the rewards of any investment. In order to enjoy the possible upside of investing, you must be prepared (mentally and financially) for the possible downside.

When should you start saving and investing? You should start saving and investing at the earliest possible time.

Take full advantage of employer offered savings and investing plans. For example, if you work for a company that offers a 401(k) plan, in which an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pretax basis, you may decide that is a good entry into investing. In a 401(k) plan, you may contribute a set amount of your salary and your employer may “match” that contribution, up to a limit. The opportunity to participate in such a plan is a good way to start investing.

Where to start? If you’ve decided to invest, what are your first steps?

Start by learning about investing or get an adviser.

Next, clarify your goals. There are many reasons to invest. Some people invest to earn money for their retirement. Others may invest to help send a child to college. If you can keep your ultimate goal in mind, it may help you make decisions about which investment product make sense for you.

One option for saving for college is a 529 Plan. This is a tax-advantaged savings plan designed to encourage saving for future college costs. There are two types of 529 plans: pre-paid tuition plans and college savings plans. All 50 states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsors a pre-paid tuition plan. For more information on 529 accounts, visit investor.gov/life-events/birth/saving-your-childs-education-529-plans.

Investing is an activity that requires you to spend money in hopes of making money. Common investments are stocks, bonds and mutual funds. Investing is an expansive topic. We will just address some basic concepts here. Many resources exist for individuals who want to learn more about investing. Look at this next section as an introduction to the process.

The Securities Investor Protection Corporation (SIPC)The SIPC offers some protection for investors when cash, stocks and other securities are missing from a customer account at an SIPC-insured brokerage firm, or if the firm becomes insolvent. The SIPC does not protect against investments losing value. The SIPC is a nonprofit, government-sponsored corporation that protects customers of insured broker-dealers, up to $500,000 per account holder (including a maximum of $250,000 for cash claims). Similar to FDIC

insurance with banks, you should look for brokers who are insured by the SIPC.

If a brokerage firm is closed due to bankruptcy or other financial difficulties, and customer assets are missing, the SIPC steps in and, within certain limits, works to

return the value of customers’ cash, stock and other securities, up to SIPC-protected amounts. Without the SIPC, investors at financially troubled brokerage firms might lose their securities or money or wait for years while their assets are tied up in court.

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Once you know your goals, you’re ready to begin researching your options. Some good places for investing information:

Your Bank: Many banks offer investment services, including investment advice and brokerage services, which help you purchase mutual funds, stocks, bonds and other securities.

Note that investment services and products provided by a bank:

• Are not FDIC insured

• Are not bank guaranteed

• May lose value

Independent Financial Professional: Professionals such as investment advisers and financial planners can offer you personalized advice and services. Most charge a flat fee or a percentage of the money (assets) you ask them to manage. Financial planners can offer investment advice, but they also specialize in tax planning, asset (money) allocation, risk management, retirement and/or estate planning. Most financial planners are investment advisers, but not all investment advisers are financial planners.

Where to start investing (cont.)

Making the best investment choices

StocksStocks are a type of security that gives owners an ownership share in the issuing company. Stocks also are called “equities.”

BondsWhen you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity, known as the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it “matures,” or comes due.

There are many different kinds of bonds, including: U.S. government securities, municipal bonds, corporate bonds, mortgage and asset-backed securities, federal agency securities and foreign government bonds.

Whether you invest on your own or hire someone to help you, you’ll need to become familiar with some of the most popular investment options.

Even though I don’t have a lot of money, I decided to consult a financial planner to help me with some important financial decisions, such as dealing with my tax issues and setting up a plan for me to save for my retirement.

My financial planner was able to see the big picture of my financial situation and give me advice on how I could meet my goals.

Becoming Wallet Wise

Making the best investment choices (cont.)

Mutual funds A mutual fund is a type of investment company that pools money from many investors and invests it in instruments, including stocks, bonds, money-market instruments and other securities.

By combining your money with the money of other investors, you can diversify even a small investment. Diversification is a method of lowering your investment risk. Essentially it means not putting all of your eggs in one basket.

Diversification reduces the risk that you will incur significant losses because you spread the risk of loss across many savings and investment options. If one investment loses money, its negative effect on your total portfolio will be less than if you had an undiversified concentration in that investment.

Stock and mutual funds are often in the news. It’s common to read that one stock or fund is “hot” and that another is disappointing. But news headlines are not your best source of information when it comes to choosing a stock or mutual fund. Better sources include financial websites and services such as MorningStar. The best fund for you depends upon your financial situation and goals, along with performance, expenses, loads, quality of management and related services.

Retirement ProductsDepending on your investment goals, there may be special investment products designed for

your particular circumstances. For example, we discussed earlier in this section investing in an employer-sponsored 401(k) Plan – this is a popular choice for individuals investing for retirement. If your employer does not offer this option, or you’ve made the maximum contribution permitted by law, you may want to look at an Individual Retirement Account (IRA). There are different kinds:

• Traditional IRA: An IRA, or individual retirement arrangement, is a personal savings plan that allows you to set aside money for retirement, while offering you tax advantages. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances. Generally, a traditional IRA investment earnings are not taxed until distributed.

• Roth IRA: Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions are tax-free.

• Simplified Employee Pension (SEP) IRA: An SEP plan allows employers to contribute to traditional IRAs set up for employees. A business of any size, even self-employed, can establish a SEP.

I was interested in investing in stocks, but I didn’t know which stocks to buy. Rather than trying to buy individual stocks on my

own, I decided to invest in a mutual fund and have an investment adviser help me. Before meeting with the adviser, I visited the Securities Exchange Commission website (http://www.sec.gov/investor/brokers.htm) and came up with a list of questions that helped guide my decision regarding which adviser to work with:

•Canyouonlyrecommendalimitednumberofproductsorservicestome?If so, why?

•Haveyoueverbeendisciplinedbyanygovernmentregulatorforunethicalor improper conduct or been sued by a client who was not happy with the work you did?

•Howareyoupaidforyourservices? What is your usual hourly rate, flat fee or commission?

Now, I know more about the various mutual fund options available and I feel comfortable obtaining recommendations from an investment adviser.

Becoming Wallet Wise

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Banking and investing quiz

Consumer Resources

Answer the following questions to review banking and investing.*

1. Which of the following is a member-owned financial institution?

a. Retail Bank

b. Credit Union

c. Savings and Loan

d. Direct Bank

2. Debit cards can be:

a. A quick way to get a small loan

b. A way to delay having a purchase come out of your account

c. Paid off over time

d. Used at many retailers

3. Both the FDIC and NCUA insure savings for up to:

a. The amount of your savings, regardless of the amount

b $10,000 per depositor

c. $100,000 per depositor

d. $250,000 per depositor

4. True or False: There is never a fee for using an ATM.

a. True b . False

*Answers: 1. b, 2. d, 3. d, 4 . b, 5. a, 6. c, 7. a

5. Which of the following products is generally insured by the FDIC?

a. Checking account

b. Stocks

c. Bonds

d. Mutual Funds

6. This is the product that allows you to diversify your investments so that you can reduce the risk of losing your money.

a. Bonds

b. Stocks

c. Mutual Funds

d. 401(k) plan

7. What is the major difference between saving and investing?

a. Most savings products are federally insured, while investment products are not

b. Savings products have a risk of loss and investment products do not

c. Investment products do not have as high a potential for growth as savings products

d. Savings and investment products are the same

For more information on the basics of investing, consider these sources:

Beginners’ Guide to Investing: Online Publications at the SEC www.sec.gov/investor/pubs/begininvest.htm

MyMoney.govwww.mymoney.gov/category/topic1/saving-and-investing.html

Investor.govwww.investor.gov/how-mutual-funds-work/

Taking the Mystery Out of Retirement Planningwww.dol.gov/ebsa/publications/ nearretirement.html

Saving for Educationwww.investor.gov/life-events/birth/ saving-your-childs-education- 529-plans

Notes:

Wallet Wise © 2011 Ally Financial, Inc. Ally Bank is a member FDIC. Equal Housing Lender.