Money, Banking, Saving, and Investing

Understanding Money and Banking

Core Functions:
- Medium of Exchange: Streamlining trade by eliminating the need for a barter system.
- Standard of Value: Providing a benchmark for valuing goods and services.
- Store of Value: Maintaining purchasing power for future use.
Critical Attributes:
- Acceptability: Wide acceptance in transactions.
- Scarcity: Limited supply to maintain value.
- Portability: Easy to transport and transfer.
- Durability: Long-lasting and not easily degraded.
- Divisibility: Can be divided into smaller units without losing value.
- Uniformity: Standardization ensures equal value for equal denominations.
Historical Progression:
- Transition from Barter Systems to Banking Evolution, leading to modern Fiat Money.

Core Functions:
- Deposits: Accepting funds through various accounts.
- Loans: Issuing loans with interest for profit.
- Services: Offering ATMs, cards, and electronic payments.
Role of the Federal Reserve:
- Providing stability and managing the monetary system.

Purpose and Impact:
- Saving spurs economic growth and helps in achieving financial goals.
- Preparing for emergencies and retirement.
Budgeting:
- Essential for managing monthly income and expenses.
- Prioritizing savings in financial planning.

Introduction to Market Dynamics:
- Trading Up: The strategy of incrementally increasing asset value (illustrated by the paperclip to house trade).
The Essence of Investing:
- Balancing risks and potential returns.
- Understanding compound interest (Rule of 72).
Investment Options:
- Low Risk: Government securities and insured accounts.
- Medium Risk: Corporate bonds.
- High Risk/Return: Stocks and market-driven investments.
Diversification and Strategy:
- Utilizing Mutual Funds for simplified diversity.
- Tailoring Asset Allocation for personalized risk management.

Plastic Money:
- Credit Card: Borrowing tool allowing purchases on credit.
- Debit Card: Direct-access tool to bank account funds.
Understanding Interest:
- Costs associated with borrowing (credit cards, loans).
- Earned on savings and investments.
Principal: The base amount in savings, investments, or loans.