Personal Finance: Banking, Saving, Interest

Credit union: profit

not for profit

Credit union: ownership

owned by members who share common bond

Credit union: fees & interest rate

lower fees, higher interest rates

Credit union: amount of financial services offered

fewer financial services

Credit union: size

smaller

Banks: profit

for profit

Banks: ownership

open to anyone

Banks: fees interest rates

higher fees, lower interest rates

Banks: amount of financial services offered

more financial services

Banks: size

larger

Credit union: Insuring agency

NCUA (National credit union association)

Credit union: insurance limit

$250,000

Banks: insuring agency

FDIC (Federal Deposit Insurance Corporation)

Banks: insurance limit

$250,000

Advantage of using online-only bank

lower fees and they pay higher interest because they don’t have to spend money on branch maintenance

Federal reserve

central bank of the U.S. and was established to provide a safer, more flexible, and stable monetary and financial system

Federal reserve main functions

• conducting monetary policy to promote maximum employment and stable prices

• supervising and regulating financial institutions

• maintaining the stability of the financial system

Federal reserve is made up of…

• board of governors

• reserve banks

• federal open market committee (FOMC)

Checking account

• convenience/safety (daily purchases)

• most liquid of these savings tools

• lowest of these savings tools (usually don’t earn interest)

Saving account

• to set aside money for emergencies or long-term purchase

• less liquid than checking

• more interest than checking accounts

Money market account

• ideal for storing money for short-term goals

• less liquid than savings and checking accounts

• tiered interest rates (higher interest for higher balances)

Certificate of deposit

• used for a fixed period of time (3 months-5 years, maybe 10 years)

• least liquid of these four savings tools (may pay penalties for withdrawing money early)

• highest potential interest of these four tools, interest depends on the length of the CD, the longer the term (length of years), the higher the interest