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1.7.3.G1 Financial Institutions Information on Financial Institutions & Services © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Financial Institutions Commercial Bank Savings and Loan Association Credit Union Brokerage Firm © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Commercial Bank Wide variety of services and products Usually the largest financial institutions FDIC insured Examples – Wells Fargo, US Bank, First Interstate Bank © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Commercial Bank Services Checking Accounts are the only financial institution allowed to offer non-interest paying checking accounts They Savings Accounts Safe-Deposit Boxes Credit cards Certificate of Deposit (CDs) Financial Services Investments Loans Mortgages © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Credit Union Non-profit, member owned Charge lower fees & loan rates Offer higher interest rates NCUA insured Examples – BECU, School Employees Credit Union © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Credit Union Services Same as commercial bank Share Draft Accounts (checking) Share Accounts (savings) Share Certificate Accounts (CDs) Safe-Deposit Box Credit Card Financial Counseling Investment Loan Mortgage Retirement Plan Account © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Savings and Loan Association (S&Ls) Provide loans & mortgages to customers with a savings account Pay higher interest rate than commercial banks Offer interest-earning checking accounts © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 S&L Services Checking Accounts Savings Accounts Certificate of Deposit (CDs) Retirement Plan Accounts Financial Counseling Investments Loans Mortgages © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Brokerage Firm Offer money management plans for investing Provide financial assistance and advice Examples – DA Davidson & Co., Merrill Lynch © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Brokerage Firm Services Investments Bonds Stocks Mutual Funds Financial Counseling Real Estate Investment Retirement Plan Accounts **Customers can move money between accounts easily © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Insurance for Financial Institutions Insurance for deposits up to $250,000 Credit Unions (NCUA) Commercial Banks (FDIC) Savings and Loans (SAIF) © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Federal Reserve Bank Federal Reserve Bank –Services provided to depository institutions include: Collecting checks Electronically transferring funds Distributing and receiving cash and coin © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Life of a Deposited Check Look closely at steps 2-4 to see how the Federal Reserve bank plays an integral role in how a check transaction works © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Federal Reserve Bank Which federal reserve bank located in your region? © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Benefits & Advantages to using Financial Institutions © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Benefits of Financial Institutions Convenience Cost savings Less expensive to purchase money orders and to cash checks Other businesses may charge to cash checks © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Benefits continued Safety Protection from fire, theft, & loss Security Money is protected by the federal government in federally insured institutions Up to $250,000 for each depositor © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Advantages Using one financial institution may include these advantages: Simplicity – having all accounts at one place can simplify banking Relationship – establishing relationships can be beneficial when applying for loans Lower interest rates on loans may be offered to loyal customers! © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Remember Shop around for the best service, rates, products, and locations before choosing a financial institution!!! © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Financial Institution Services © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Definition of Services Bonds Lending money to an organization as an investment, an “IOU” Purchased at a fixed interest rate and period of time Certificate of Deposit (CD) An insured interest earning savings instrument with restricted access to the funds. An investment with no risks and no fees © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Checking Account Paper checks or debit cards are used to withdraw money deposited into the account to pay for items May be interest or non-interest bearing Credit Card A plastic card used to make a purchase now to be repaid later usually with interest to the credit card company © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Financial Counseling Information and advice given to customers to help them make decisions about financial issues Investment A commitment of money to achieve long-term financial goals Many different types are available Loan Borrowed money consumers apply for at financial institutions Paid back at various interest rates in payments © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Mortgage A long-term loan to purchase real estate such as a house Mutual Fund Groups of stocks, bonds, and other investments managed by an investment firm Real Estate Investment Purchasing real estate as an investment May buy a lower priced house, make improvements, and sell at a higher price © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Retirement Plan Account Plans to set aside money for retirement Money is tax-deferred until withdrawn May be offered through an employer or set up through a financial institution Safe-Deposit Box A secured box in a bank to be used for valuable and important personal items Items are safe from theft and fire © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Savings Account Money is deposited into an account to earn interest Funds are easily accessible and safe Share Account A Share Certificate Account A savings account at a Credit Union certificate of deposit at a Credit Union Share Draft Account A checking account at a Credit Union © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Services continued Stock Ownership in corporation Represented by shares © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Review © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 Review Money management is part of everyday life! Financial institutions offer multiple services – shop around for the one which best fits your needs! Check to see if the financial institution is insured by the FDIC, SAIF, or the NCUA. Learn about the financial services before choosing one. Example – checking, savings, investments, etc. © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman 1.7.3.G1 The End © Family Economics & Financial Education – Revised October 2004 – Financial Institutions Unit – Financial Institutions Funded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University – Bozeman