Financial Deposit Institutions
Module L: Personal Finance Responsibility:
Unit 1: Banking in the Real and All virtual enterprises employees
Virtual enterprise students will establish End of week 5 for 10-hour program
personal financial goals and practice End of week 8 for 5-hour program
sound financial decision-making.
Lesson Virtual enterprise employees will:
Objective(s): 1. Define basic banking terms introduced in this lesson.
2. Distinguish between deposit and non-deposit financial
3. Identify and explain services provided by financial institutions.
Instruction and Procedures
What you need to know:
Once you have been hired for a job, you will begin receiving paychecks. You may have
difficulty cashing your check if you do not have a bank account. This lesson will help
you learn about different types of financial institutions and the services they offer so that
you can make an informed decision as to which will best fit your needs.
Financial institutions such as banks and credit unions offer a number of services for their
customers. Financial institutions are usually classified by the kinds of services they
offer. One kind of financial institution most people use is a deposit institution. This
type institution accepts deposits from individuals and businesses to be used in the
future. Deposit-type institutions include commercial banks, savings and loan
associations, mutual savings banks, and credit unions.
The most common deposit-type institution is the commercial bank. Commercial banks
are often referred to as full-service banks because they offer a wide range of financial
services. A commercial bank offers checking accounts, savings accounts, loans to
businesses and individuals, and other services.
A savings and loan association (S&L) specializes in savings accounts and home
mortgage loans. Mutual savings banks also specialize in savings accounts and
making loans to home buyers. The major difference between an S&L and a mutual
savings bank is that a mutual savings bank is owned by the depositors; and profits go to
Credit unions offer many of the same services as a commercial bank. A credit union is
user-owned and is nonprofit. Credit unions are usually formed by people in the same
company, profession, church, government agency, or labor union.
Non-deposit financial institutions include life insurance companies, investment
companies, finance companies, mortgage companies, check-cashing companies, and
pawn shops. A non-deposit institution’s main earnings come from selling specific
services or policies.
All financial institutions are businesses. They all need to generate revenue. Revenue
comes from interest charged on loans, fees for banking services, and from investing part
of the money they have on deposit. To protect your money, financial institutions are
regulated by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures
individual deposits up to $100,000 in the same bank. Almost 99% of all banks are FDIC
What services do you need?
The most common services available from financial institutions include accepting
deposits, transferring funds, lending money, storing valuable objects (safe-deposit
boxes), and providing investment services and financial advice.
One of the first financial services you will need is a checking account. A checking
account will allow you to make deposits and transfer money.
Types of Checking Accounts
A joint account is opened by one or more people. Students frequently open a joint
account with a parent so that the parent can make deposits or access the account in
case of an emergency. Many husbands and wives have joint accounts. One decision to
be made is whether it will be an “or” account or an “and” account. If the account is
designated “or”, any party on the account may sign checks. If the account is designated
“and”, all parties on the account must sign checks.
Most banks have special accounts for individuals who will write a limited number of
checks each month. Special accounts might be offered for students or senior citizens.
This type of account usually has certain restrictions as to the number of checks written
each month, visits to the bank, etc. Fees for this type account would vary from one bank
Standard accounts usually have a monthly service fee and a minimum balance
Interest-bearing accounts are available at most banks. This type of account usually
requires a minimum average balance of $500.
Share accounts are offered at credit unions. These accounts generally have low or no
minimum balance requirements and no monthly fees. You must be a member of the
credit union to obtain a share account. If you are eligible to join a credit union, this may
be the most economical type of account for you.
Other Bank Services
A certified check is a check that the bank guarantees is good. Occasionally someone
may ask you for a certified check. This is their way of reducing the risk of taking a bad
A cashier’s check is a check written by the bank from its funds. You give your funds to
the bank that then writes the check. A cashier’s check guarantees payment with out you
having to have cash in hand.
Money orders are used in place of cash or when someone does not have a checking
account. Money orders are purchased for a fee. The amount of the fee depends on the
amount of the money order. Money orders may also be purchased from the post office
as well as some local businesses.
A debit card is usually issued when you open a checking account. When a debit card is
used, funds are immediately deducted from your checking account. A debit card
transaction will not be processed if the funds are not in your account. Fees for using a
debit card vary. Debit cards may be used at ATM machines to withdraw cash.
You must apply for and meet certain requirements if you wish to have a bank credit
card such as VISA or MasterCard. An annual fee is usually charged, and interest must
be paid on any unpaid monthly balance.
Many banking activities can now be handled through an automated teller machine
(ATM) by means of electronic funds transfer (EFT) using your debit card. A personal
identification number (PIN) is required to access your account using a debit card.
Safe-deposit boxes are available for a yearly fee to store valuable documents such as
birth certificates, marriage licenses, deeds, stocks and bonds. Other small valuables
such as jewelry, coin collections, etc. may also be stored in a safe-deposit box.
What you need to do and how to do it:
1. Complete the Financial Institutions Activity to demonstrate your understanding of
deposit and non-deposit institutions.
2. Assume you need to open a checking account. Selecting a bank is a very personal
decision. You may select a bank because it is close to your home or work or
because it has the most ATM machines. All banks do not offer the same services
or checking account features. Incentives to attract customers may include such
things as no minimum balance, no ATM fees, or interest paid on deposits. On a
separate sheet of paper, make a list of the bank or checking account services you
want your bank to offer.
Research the banking institutions in your area to determine where you should open
your account. Use your list of services created above and the Selecting a Bank
Worksheet to record your findings. Gather information on at least two banking
institutions. You may find your information by checking a web site, by making
phone calls, or making a visit to the bank. Submit your completed worksheets to
your VE Coordinator.
Financial Institutions Activity
Selecting A Bank Worksheet
Financial Institutions Activity
Selecting A Bank Activity
Eggland Steven S., Les R. Dlabay and James L. Burrow. Intro to Business. 5th ed.
Cincinnati: South-Western, 2004.
Ryan, Joan S. Managing Your Personal Finances. 4th ed. Cincinnati: South-Western
Miller, Roger LeRoy and Alan D. Stafford. Economic Education For Consumers. 2e
Cincinnati: South-Western 2004