Post on 22-Dec-2015
Introductions
• Rachel Martini – Customer Relations Specialist
• Lindsey Bamba – Westside Branch Manager
Overview of 2 Days
• Types of depository institutions• Deposit Insurance• Factors to consider when
choosing a depository institution
• Types of accounts• Types of services• Interest• Credit• Worksheets/Homework/Quiz
What is a Depository/Financial
Institution?
Depository institution –
businesses that provide financial services
What is the name of one depository institution in your
community?
Types of Depository Institutions
Three types of depository institutions are:Commercial
BanksCommunity Banks Credit Unions
Each type is unique – choose what is best for you
For-profit
Open to anyone who wants to utilize a depository institution
Offer numerous financial services
Usually the largest depository institutions nationwide
Not-for-profit – owned by members
Have membership qualifications – members must share a “common bond”Offer many services but usually not as many as a bank
Are often able to pay higher interest rates and charge lower fees
For-profit (may be owned by their members, or they may be publicly held
Open to individuals or small local businesses who want a local depository institution
Local or regional - Range in size but usually found in local communities
Offer numerous financial services
BANKS
• Investment• Commercial• Community• Savings & Loan
• Employer• Community• Military
CREDIT UNIONS (MEMBERS ONLY)
Types of Depository InstitutionsWhich one should you choose?
Location
Can be an important factor when choosing a depository institution
Physical location or
only online?
Multiple locations or just one?
Locations all across the U.S. or only in your
state or city/town?
Do you have transportation to get to a
location?
Do you know how many locations your financial institution has?
Depository institutions keep your money safe
• Offer a safe and secure place to store your money
• Security (safes, secure networks, etc.)
• Insurance
Federal Deposit Insurance
Corporation (FDIC)
National Credit Union
Administration (NCUA)
How can insurance play a role in choosing a
depository institution?
Insures banks and other types of institutions
other than credit unions
$250,000 per depositor, per
insured institution, for each account
ownership type
Insures credit unions
Same as FDIC
Businesses offer services to the public
What services do these businesses offer?
Grocery store
Gas station
Restaurant
Clothing store
Services offered by depository institutions
What are three services a depository
institution might offer to entice you
to choose them over another?
(free checking, high interest rate, etc.)
Transaction and
Savings Tools
Credit
Financial Advice
Safe-Deposit Box
Special Needs
Payment Instruments
Savings Tools
Accounts that help you
manage your money
May or may not earn interest
The 2 most common accounts:
Checking Account
Savings Account
Does anyone have a checking or savings account?
Checking Account Savings Account
Should you look for a low or high interest rate on a savings
account?
Provides quick access to funds for transactions
Use deposited money anytime by:• Writing checks• Using a debit card• Withdrawing cash• Electronically transferring
money
Some earn interest but most do not
An account for money not intended to be used for daily expenses
Access to money is more limited than a checking account
Earn interest
Account Purposes
Depository institutions offer the ability to earn interest
Interest - the price paid for using someone else’s money
You can earn interest or be charged interest
The amount of interest earned or charged is determined by the interest rate (percentage rate used to calculate interest, usually an annual rate)
Interest ExplainedWhat is Interest?• An amount of money banks or other financial
institution pay you for keeping money on deposit with them or to use their money. Expressed as a percentage.
What is Annual Percentage Yield? (APY)• The amount of interest you will earn on a yearly
basis, expressed as a percentage.• The more often your money compounds, the
higher the APY, and the more interest you will receive.
• Compare the APYs of different accounts, not the interest rate.
Interest Rate View
$100 deposited in an account earning 2%
interest
Look for high interest rates when earning interest
Look for low interest rates when paying interest
$100 .02 $2
Simple Interest
per year
What if You Saved $5 a Day
No Interest
2% Rate of
Return
Year 1
$1,825
$1,844
Year 5
$9,125
$9,595
Year 10
$18,250
$20,188
Where can you find $5?
Credit
What is it? What can you do?
Other Information
• Borrowing money
• Loans• Auto• Home• Student
• Credit cards
• You will pay back the money borrowed plus interest
Loan Services:When should I get a loan?
• Car Loan (Installment Loan)• Repaid over time with a set number of scheduled
payments for a certain term (i.e. 48 months)• Home Loan (Mortgage Loan)
• Home ownership - a long-term living commitment to be over the next 15 to 30 years. An investment that is much more reliable than anything the stock market can offer.
• Credit Card• Variable interest rate. May include additional fees
and finance charges.
Read the fine print. It may include more details that can cost you more than expected in the long run. (Annual fees, early termination fees, etc.)
How long would it take to pay off my credit card balance?
Do I really need to buy those shoes?
Balance $250 $500 $1,000
Interest RateYears to pay off at 2%Minimum Payment*
15% 1.58 3.67 9.83
18% 1.67 3.92 12.58
21% 1.67 4.25 19.58
24% 1.75 4.67 ?
*2% is the typical minimum payment requirement or $10, whichever is higher
$851.03 int.
$1,396.77 int.
$2,797.55 int.
$150.87 int.
$198.34 int.
$257.01 int.
$32.09 int.
$39.85 int.
$48.18 int.
$57.18 int. $332.22 int.
Which option is better?
Saving? Credit Card?
OR
Saving is well worth the money. Remember to create a budget and stick to it.
$1,938 earned
$470 earned
$19 earned
Today’s good saving habits will pay off tomorrow!
What is a credit score?A credit score is a three digit number used by lenders to determine your creditworthiness for a mortgage, loan or credit card. Your score can affect whether or not you are approved as well as what interest rate you are charged.
How is my credit score calculated?
Use Credit Wisely
• Advantages• Build credit• Rent a car• Available for emergencies• Bonuses/Frequent flyer
miles• Online purchases• Convenience
• Disadvantages• Negatively affect credit• Debt accumulation• Years to repay debt• High interest rates• Repayment could be 3 to 5
times the original purchase price
I.O.U.$
Obtaining a loan or credit card…
Meet Josie
Has been accepted to a university 3 hours from home
Making important decisions about her future, especially
regarding money
Looking for a safe place to store her money and pay her
bills while at college
Senior in high school
Your mission: Learn more about Josie and depository
institutions to help her make the best choice
Found two depository institutions in her
hometown that also have branches near
her college
She has summarized their information on the
“Josie’s Depository Institution Comparison
Chart”
Help Josie manage her money by choosing a depository institution