Functions of Financial Institutions

12.01: Financial
Institutions

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Objective

Students will be able to....

●

compare the types of financial institutions and evaluate
which might be best in different situations

●

evaluate services and related costs associated with
personal banking

Open Ended

What are the names of some banks that you know about?

Different types of Banks

1. Commercial

Banks

2. Credit Unions
3. Savings and

Loans

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Commercial Banks

●

Most services (checking,
savings, loans, credit cards)

●

For-profit, not owned by
members

●

Savings insured by FDIC
Examples:

●

Wells Fargo, Chase, Bank of
America, etc.

Multiple Choice

Financial institutions act as intermediaries between borrowers and savers by receiving deposits and making loans. Financial institutions encourage saving by paying _____ on deposits.

• Interest

• Loans

• Dividends

• Savings

Multiple Choice

A ____ is a financial intermediary that accepts deposits, makes loans, and offers checking accounts.

• bank

• payday lender

• federal reserve

• brokerage firm

How do they make money?

interest charged > interest earned

Banks and other finanical institutions loan the money that we give them to other people at a higher rate other people

Credit Unions

●Many services (checking, savings,
loans, sometimes credit cards)

●Non-profit, owned by members

●Often offers better rates

● Savings insured by NCUA
Examples:

●Navy Federal, PenFed, Virginia,
Apple Federal

Savings and Loans

●

Only savings & loans
(mortgages)

●

Usually local, kind of dying

●

For-profit, can be owned by
members

●

Savings insured by FDIC
Examples:

Match

Match the following

If you need help, look at the last slide.

• Bank

• Credit Union

• Savings and Loan Association

• Internet Bank

A business that offers financial services to make a profit.

A financial institution owned and controlled by members with profits invested to benefit members

A financial institution that offers interest on savings and lends money for home mortgage loans.

These banks can offer better interest rates because they don't have a physical location to rent.

• A business that offers financial services to make a profit.

• A financial institution owned and controlled by members with profits invested to benefit members

• A financial institution that offers interest on savings and lends money for home mortgage loans.

• These banks can offer better interest rates because they don't have a physical location to rent.

Multiple Choice

Which of the following are intermediaries between people who save money and people who borrow money?

• Political candidates

• Government officials

• Banks, credit unions, financial institutions

• Schools or colleges

Multiple Select

Private financial institutions include (check ALL that apply):

• Federal Reserve

• Savings & Loans

• Credit Unions

• Loans "R" Us

• Banks

Multiple Choice

Examples of these types of banks are Wells Fargo, Chase, and Regions

• commercial banks

• credit unions

• charters

Multiple Choice

an independent agency created by the federal government to protect bank customers by insuring their deposits

• Federal Deposit Insurance Corporation

• Financial Depository Insurance Company

• Financial Department of Insurance Corporation

Multiple Choice

a non profit financial cooperative owned by and operated for the benefit of its members; services offered only to its members

• credit union

• commercial bank

• savings and loans associations

Multiple Choice

Malcolm is a busy executive who uses his time wisely. He wants a bank that can process his paycheck automatically, pays high interest and is open 24/7.

What kind of financial institution would you recommend and why?

• Internet Bank: always available, offers competitive interest rates and automatic check deposits

• Credit Union: locally run, offers business services and loans

• Bank: easily accessible, helpful staff at local branches, online services

• Savings and Loan: focused on real estate financing, locally run, insured by government

Multiple Choice

Maria and Martin are opening a new business and want a secure local bank that can process their loan and offer them other services for their business.

What kind of financial institution would you recommend and why?

(Look for a key word!!!)

• Internet Bank: always available, offers competitive interest rates and automatic check deposits

• Credit Union: locally run, offers business services and loans

• Bank: easily accessible, helpful staff at local branches, online services

• Savings and Loan: focused on real estate financing, locally run, insured by government

Multiple Choice

Jose and Juanita are buying their first home. They want a low interest rate on loans and want to deal with someone local to help them.

What kind of financial institution would you recommend and why?

• Savings and Loan: focused on real estate (houses) financing, locally run, insured by government

• Internet Bank: always available, offers competitive interest rates

• Credit Union: locally run, offers business services and loans

• Bank: easily accessible, helpful staff at many locations, online services, debt/credit cards

Multiple Choice

Max is opening his first bank account. He plans to save for college and wants to be able to deposit checks and use a debit card.

What kind of financial institution would you recommend and why?

• Internet Bank: always available, offers competitive interest rates

• Credit Union: locally run, offers business services and loans

• Bank: easily accessible, helpful staff at many locations, online services, debt/credit cards

• Savings and Loan: focused on real estate financing, locally run, insured by government

Payday Loans & Check Cashing

●

Only loans (crazy high-interest)
& check cashing (high fees)

●

For the under/unbanked

●

AVOID!!There are free
alternatives (Even for undocumented)

●

Not insured

Examples:
●

Local, sketchy, loud advertising

Multiple Choice

Property required by the lender and offered by a borrower as a guarantee of payment on a loan.

• finance charge

• fixed property

• collateral

• lien

Multiple Select

Payday loans take out ____ advances on your ______

• cash

• bank

• paycheck

• loan