Paycheck

Economics

Lesson 2 – “W” is for Wages, W-4, and W-2

» Income - the payment people receive for providing resources in the

market

» Wages - the income for providing human resources (labor)

Paycheck

» Taxes - government fees on business and individual income, activities,

products or property

» Gross pay - the amount people earn per pay period before any deductions or taxes are paid

» Net pay - the amount people receive after taxes and other deductions are

taken out

Form W-4 is a form that must be completed by employees before they start a job.

FICA

»FICA is a tax or required contribution resulting from

the Federal Income Contributions Act

Form W-2 is a form employers must provide to employees at the end of each year to report annual income and withholding for the employee's tax return.

What are Taxes?

»Taxes are government fees on business and individual income, activities, products or property. People are required to pay taxes.

What is FICA?

»FICA is a tax or required contribution resulting from the Federal Insurance Contributions Act.

What is Income?

»Income is payment people receive for providing resources in the market.

What are Wages?

»Wages are a form of income people receive for work they do.

What is Net Pay?

»Net pay is take-home pay; it's the amount received after taxes and deductions have been taken out.

What does FICA Fund?

»FICA funds Social Security and Medicare.

What is Gross Pay?

»Gross pay is the amount people earn in a pay period before any deductions or taxes are taken out

What is a W-4 and What is it used for?

»A W-4 form is a form that must be completed by employees before they start a job. It is used by employers to determine the amount of income tax to withhold.

What is a W-2?

»A W-2 form is a form employers must provide to employees shortly after year-end to report annual income and withholding for the employee's tax return.

Who pays FICA?

»Both employees and employers pay FICA.

Lesson 3 – Cash the Check and Track the Dough

Checking

Checking account - an account held at a bank, credit union or other financial institution in which account owners deposit funds.

Account owners have the privilege of writing checks on their accounts and are able to use ATM cards and debit cards to access funds.

Savings

Savings account - an account at a bank, credit union or other financial institution in which account owners deposit funds.

Account owners are paid interest on the amount deposited in the account. Account owners have the ability to withdraw funds but do not write checks on these accounts. The number of withdrawals in a given period of time may be limited.

Thumbs Up or Thumbs Down?

People are able to make deposits to and withdrawals from both savings accounts and checking accounts.

Check-cashing services charge minimal fees for cashing checks.

Thumbs Up or Down?

Usually people are able to cash checks for free or for a much reduced fee (less than a few dollars a month) at the bank where they have a savings or checking

account.

There are fees or costs associated with checking accounts.

Thumbs Up or Thumbs Down?

Savings accounts pay interest on the balance in the account.

It isn’t legal for companies to require employees to use “direct deposit.”

With a checking account, you can write checks to pay for many types of goods and services.

There are no fees associated with savings accounts.

Thumbs Up or Down?

You may use an ATM or debit card with both savings and checking accounts.

Banks are a safe place to keep your money.

» If you want to keep track of the money in your account, what information do you need?

» the amount of each deposit» the amount of each withdrawal» the amount of each check that you write» the amount of each purchase you make

with a debit card

Keep Track

» How could you keep track of the money in your account, i.e., your financial transactions?

» computer spreadsheet» computer program» a notebook

Banks

» Banks provide bank account registers in which account holders are able to record information in order to keep track of their money.

» When people bank online, they can view an online table that indicates deposits that the bank has received, withdrawals that the bank has recorded, checks that the bank has paid and debit card transactions.

Banks

» Bank primary function is to make a profit

» Banks create money by lending out part of their deposits

» The money supply is the money in circulation plus bank deposits

» Money main 3 functions˃Medium of account˃Unit of account˃Store value

Account Number

Check NumberBank Routing Number

Bank Customer name, address & number

Banking Institution name, address

Review

» What are some advantages for having a checking or savings account˃ money is safe, your money may earn interest depending on the type

of account, low or no fees for cashing checks, record of transactions

» What is a disadvantage of using check-cashing services?˃ The fees are very high.

» Why is it important to maintain account records and keep track of bank account balances?˃ to avoid paying fees for overdrafts, to make certain the records are

accurate and show the correct balance, to know where your money is going