1.7.3.G1
FINANCIAL
INSTITUTIONS
1.7.3.G1
FINANCIAL INSTITUTIONS
Businesses which offer multiple services in banking and
finance
 They include:
 Banks
 Savings and Loans
 Credit Unions
 They are regulated by various state and federal agencies
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
FINANCIAL INSTITUTIONS
Why consumers may
use them:
Why consumers may
not use them:
To have the opportunity
to receive lower cost
loan
To receive the
advantages of interest
earning accounts
They wish to keep their
financial information
private
To keep money safe
Fees are too high
Minimum balances
required are too high
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
FEDERAL RESERVE BANK
Services include:
Collecting
checks
The “Fed”
is part of the
central
banking
system in the
United States
Distributing
and receiving
cash and
coin
Electronically
transferring
funds
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
FEDERAL RESERVE REGIONAL LOCATIONS
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
LIFE OF A DEPOSITED CHECK
Step 1: A check is
deposited…
Step 5: The check writer’s
bank deducts the amount
from the account
Step 4: From here it goes to
the check writer’s bank
Step 2: The depositor’s bank
encodes, endorses, and sends
the check to the reserve bank
in the region or to a private
clearing house
Step 3: Then the check makes
its way to the regional reserve
bank, or the clearinghouse for
the region where the check
originated
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
FINANCIAL INSTITUTIONS
Commercial Bank
Credit Union
Savings and Loan Association
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
COMMERCIAL BANKS
Commercial Banks
 Usually the largest depository institutions
 Considered full-service depository institutions
 Available to a variety of consumers
Examples – Wells Fargo, US Bank, Chase Bank
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
CREDIT UNION
Credit Unions
 Non-profit cooperative depository institution
Owned by members who share a common bond
Examples –Boeing Employee Credit Union, Verity Credit Union
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
SAVINGS AND LOAN ASSOCIATION
(S&LS)
Savings and Loan Association
 Focus on providing loans and mortgages
Customers must have a savings account with them
Examples – American Federal Savings Bank, Pioneer Federal Savings & Loan.
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
1.7.3.G1
TYPES OF INSURANCE
Federal Deposit Insurance Corporation (FDIC)
 Federal government agency which protects depository
institution accounts
 Insures commercial banks and savings and loan associations
National Credit Union Administration (NCUA)
 Provides insurance for credit unions
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
INSURANCE PROTECTION
Insurance protection
 Each depositor is insured up to $250,000 for money deposited in a
regular account and $250,000 for retirement deposits
 Available from both FDIC and NCUA
Insurance is important because of the risk of loss
Risk of Loss is used to determine which party should be
responsible for damage or loss of products after a service
transaction has been completed but prior to delivery
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
INTEREST
Interest - the amount of money that is either gained or lost when accessing services
offered by a depository institution
Interest rate - the percentage used annually to calculate the total interest either gained
or lost
Type of account
Interest rate
Impact on the consumer
Interest bearing - money
earned from an investment
instrument
High
More money earned by the
consumer
Low
Less money earned
Interest bearing - the charge
for money that a consumer
borrows from a depository
institution
High
More money paid by the
consumer
Low
Less money paid
Credit unions typically offer rates which have the most positive impact on the consumer
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
FINANCIAL INSTITUTION SERVICES
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
COMMON SERVICES OFFERED
Checking account
Savings account
Also known as a
Share Draft Account
at a credit union
Also known as a
Share Account at a
credit union
Paper checks or
debit cards that are
used to withdraw
money
An account in which
money is typically
deposited to earn
interest
May or may not be
interest earning
Interest earning
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
INTEREST BEARING ACCOUNTS
Stock
• Ownership, represented by shares in a
corporation
Certificate of
Deposit
• Share certificate account at a credit union
• An insured interest – earning savings
instrument with restricted access to the funds
Money Market
Account
• An account which offers higher interest rates
than a savings account and may offer limited
check writing privileges
Bond
• A debt instrument issued by an organization
such as a business or the government
• Designed as an investment for the purchasers
to earn interest
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
INTEREST BEARING ACCOUNTS
Credit Card
 A card used to make a purchase now and repay later
 If the balance is paid before the grace period ends, interest is not added
 If the balance is paid after the grace period, the payment of interest is required
Loan
 Money borrowed and paid back with interest
 Mortgage – loan for a home
 Personal – interest rates vary depending upon type of loan
 Loan types can include vehicle, school, etc.
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
ADDITIONAL SERVICES WHICH MAY
BE OFFERED

Safe-Deposit Box
A
secured box in a bank to be used for valuable and
important personal items.

Financial Counseling
 Information
and advice is given to customers to help
make financial decisions.
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
1.7.3.G1
1.7.3.G1
REVIEW
Money management is part of everyday
life!
Depository institutions offer multiple
services – shop around for the one which
best fits your needs!
Ensure the depository institution is
insured by the FDIC or NCUA
Comparison shop the financial services
and interest rates offered before choosing
© Family Economics & Financial Education – Revised May 2010 – Depository Institutions Unit – Depository Institutions – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona