Somerset Trust will close at noon on Good Friday, 4/18/14. Our Call Center will remain open until 5 PM. Normal hours will resume on Sat., 4/19/14. All branches, including the Call Center will be closed on Easter Sunday, 4/20/14.

Kids Corner FAQs
  1. How do banks work?
  2. What is a checking account?
  3. What is a savings account?
  4. Will I earn more interest if I put more money in my account?
  5. What is a loan?
  6. Where does paper money come from?
  7. Do you know what famous American is pictured on each denomination of paper money?
  8. Where do coins come from?
  9. Can you name the famous Americans who are on the coins?
  10. What is an ATM?
Question #1: How do banks work?
Answer: People need a safe place to keep their money. That is where banks come in. If you keep your money in a savings account, banks pay you a fee for keeping your money in the bank. This additional money is called “interest”. The higher the interest rate, the more money you will earn. The amount of interest your account earns determines how quickly your money grows.

See, the green trees show how much money $100 would earn at 4% interest.

The orange trees show how much money $100 would earn at 7% interest.

 


Question #2: What is a checking account?
Answer:  It’s not a good idea to carry around large amounts of money in your pocket. Sending cash through the mail is risky too. Writing a check is safer. Besides, a check gives you proof that you paid your bill. Most kids do not need a checking account. But, as you get older, you may want to open one at your bank. When you do, you will get checks and possibly a debit card you can use instead of cash. Each time you write a check you will be telling the bank to take money from your account and pay it to the person or company the check is made payable to.

 

I paid the Bicycle Store for new reflectors for my bike with a check.
One big thing to remember about checking accounts. You cannot write a check for more than the amount of money you have in your checking account. If you do, you’re said to be overdrawn and you will have to pay a penalty fee to the bank. Not a good thing.
 
 
 
 
 
 
 
 
Question #3: What is a savings account?
Answer: Banks offer many ways for you to save your money and earn interest. Two of the most common savings accounts are a basic savings account and a certificate of deposit. Here’s the difference.
  • Basic Savings Account: A basic savings account is one where you can put your money into and take money out of the account whenever you want. Some banks require a certain amount of money to open this type of account. Your money earns a relatively low interest rate with a basic savings account.
  • CD (Certificate of Deposit): A certificate of deposit or a CD is a good account to open if you have a large amount of money that you won’t need soon. A CD earns a higher interest rate than a basic savings account because you need a larger amount to open a CD and you must keep your money in the CD for a certain period of time, usually 3 to 6 months or more. Generally, the longer you agree to keep your money in the CD, the higher the interest rate. You cannot take money out of the CD until your time period is over. If you do, you will lose interest.
 
Question #4: Will I earn more interest if I put more money in my account?
Answer: The more money you deposit (put into your account), the more money in interest you will earn. For instance, see the difference in your earnings if you deposit $100 or $1,000 at 4% interest. By the way, people who deposit money in the bank are called depositors. 

   

 

 

 

 

 

 

 

 


Question #5: What is a loan?
Answer:
Banks help people buy expensive things they could not afford otherwise, like a car and a house. That is what happens when people take out a loan. A loan is a sum of money lent for a certain amount of time. It will have to be paid back to the bank along with a fee. This fee, like that earned by depositors for keeping money in the bank, is known as interest. A bank charges people a higher rate of interest when they make loans than it pays to depositors. The money a bank has left over after paying interest to depositors is what the bank uses to pay its expenses. Expenses are things like the telephone bill, electric bill, and wages or pay for the people that work at the bank. The money left over after all expenses are paid is the bank’s profit.

 
Question #6: Where does paper money come from?
Answer: Wow, what a question. Actually, only the United States government can make money to use in the United States. Paper money is made by the Bureau of Printing and Engraving. Many bills are printed on one large sheet of special paper, then each bill is cut out into the size that fits in your wallet. Different values of money, called denominations, are printed. You know, a $1 bill, $5 bill, $10 bill, $20 bill, $50 bill and even a $100 bill.
 
 
 
 
 
 
 
Question #7: Do you know what famous American is pictured on each denomination?
 
 
 
 
 
 
 Answer: 
 
$1
One Dollar Bill
George Washington
1st United States President
$5
Five Dollar Bill
Abraham Lincoln
16th United States President
$10
10 Dollar Bill
Alexander Hamilton
1st Secretary of the US Treasury
$20
20 Dollar Bill
Andrew Jackson
7th United States President
$50
50 Dollar Bill
Ulysses S. Grant
18th United States President
$100
100 Dollar Bill
Benjamin Franklin
Founding Father of the United States
 
 
 
Question #8: Where do coins come from?
Answer: Coins are made at the United States Mint. A big heavy machine, called a press, stamps the metal with a special design and out pops a penny, or a nickel, or dime, quarter, or half dollar.
 
 

  
  
 
 
 
Question #9: Can you name the famous Americans who are on the coins?
 
 

Answer:

1 cent
Penny
Abraham Lincoln
16th President of the United States
5 cents
Nickel
Thomas Jefferson
3rd President of the United States
10 cents
Dime
Franklin D. Roosevelt
32nd President of the United States
25 cents
Quarter
George Washington
1st President of the United States
50 cents
Half Dollar
John F. Kennedy
35th President of the United States

 


 Question #10: What’s an ATM?

Answer: ATM stands for Automated Teller Machine.
It is a machine that keeps track of your money, just like a bank teller inside the bank. The best thing about ATMs is that they are always open and can be anywhere. You’ve probably seen them at the grocery store or in the mall. That’s because people use ATMs to get money out of their accounts or put money in their account.

 

 

 

Thanks for asking questions about banking.