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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depository Institutions

Take Charge of Your Finances 1.7.3

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depository Institutions

Depository Institutions – businesses which offer multiple services in banking and finance These institutions include:

Banks Savings and Loans Credit Unions

Institutions are regulated by various state and federal agencies

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depository Institutions

Why consumers may not use them:

Fees are too high Minimum balances

required are too high They wish to keep their

financial information private

Why consumers may use them:

To keep money safe To receive the advantages

of interest earning accounts

To have the opportunity to receive lower cost loan

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Federal Reserve Bank

Federal Reserve Bank – is part of the central banking system in the United States Services provided to depository institutions include:

Collecting checks Electronically transferring funds Distributing and receiving cash and coin

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Federal Reserve Bank

Which federal reserve bank located in your region?

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depository Institutions

Commercial Bank Credit Union Savings and Loan

Association

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Commercial Bank

Commercial Banks Usually the largest depository institutions Considered full-service depository institutions because

offer a wide variety of services and products

Available to a variety of consumers Examples – Wells Fargo, US Bank, Chase Bank

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Credit Union

Credit Unions Non-profit cooperative depository institution

Owned by members who share a common bond Examples – Rocky Mountain Credit Union,

Teachers Federal Credit Union

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions 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.

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Insurance Protection

Insurance protection Each depositor is insured up to $100,000 for money deposited in

a regular account Each depositor is insured up to $250,000 for qualified retirement

deposits The same protection is available from both FDIC and NCUA

Insurance is important because the risk of loss. Risk of Loss is used to determine which party should be

responsible for damage occurring to products after a service transaction has been completed but prior to delivery.

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Interest

Interest – the amount of money that is either gained or lost when accessing services offered by a depository institution Two types of interest include:

Interest earning - Money earned from an investment instrument

Interest bearing - The charge for money that a consumer borrows from a depository institution

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Interest Rates

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 earning High More money earned by the consumer

Low Less money earned

Interest bearing 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

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Depository Institution Services

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Common Services Offered

Checking account (also known as a Share Draft Account at a credit union) Paper checks or debit cards that are used to withdraw money May or may not be interest bearing

Savings account (also known as a Share Account at a credit union) An account in which money is typically deposited to earn interest Interest bearing

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Interest Earning Accounts Stock

Ownership, represented by shares in a corporation Certificate of deposit (also known as a 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

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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.

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions 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

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Conclusion& Review

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© Family Economics & Financial Education – Revised March 2008 – Financial Institutions Unit – Depository Institutions Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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 a depository institution