Banking Overview

Why do you need to keep your money in a bank? Can't you just keep all your cash in a box so that you can access it whenever you want? How safe is that? Well, if someone steals your cash, or if you have a fire, you will probably never get that money back. If you put your money in a recognized financial institution, your money is insured by the FDIC or NCUA up to $250,000.00. What does that mean? If your bank goes belly up or closes, the government will replace your money. And even if someone robs the bank, your money is insured.

Keeping your money safe is not the only reason to use financial institutions, which are organizations that provide financial products and services to consumers. Have you ever been down a major street and seen a long line of businesses offering check cashing services? These businesses, which are sometimes known as payday loan services, make money from individuals who do not have or are not using a bank or credit union. They charge you a relatively high fee to cash a check, even if it's your paycheck. They also will write checks for you, also for a fee. If you have an account at a bank or credit union, you can cash checks for free. Also, since banks have so many different services, including 24- hour banking, it is more convenient for you to take care of your financial needs.

What about interest? Are you earning interest on your money if it's sitting at your house? No, but it will if it's in a savings account or some checking accounts. Putting your money in a bank puts it to work making money without you doing anything.

Finally, a financial institution is a great place to help you establish a good credit rating. This will help you when you need to buy a car, house, or take out a personal loan. Your credit rating and being in good standing with a bank will also help you obtain a better rate on these loans or get interest on your checking account (if applicable). Using a financial institution also gives you access to services such as direct deposit, writing checks, online bill pay, and credit cards that make your life a little easier.

Selecting a Financial Insitution

So you agree that the more money you have, the better idea it is to have a bank account. What's the best financial institution for your needs? Let's look at some things you should consider as you begin researching your options. You work hard for your money. Make good choices about where you put it, and your money will start working for you!

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In other modules in this course, we'll look at companies that provide investment and insurance products. Many of the financial institutions we've just discussed also provide brokerage and insurance services, as well as financial management advisors to their customers. Remember to look at what these businesses have to offer when it comes time for you to select an institution. You might find one business that can manage many of your financial needs.