Grasping the basics of banking and budgeting are life lessons and you will require this, alongside good spending habits to be on your way to financial independence.
The Banking Industry handles cash, credit, and other financial transactions. A Bank is a regulated financial institution that accepts deposits and makes loans. There are various types of banks including retail banks and investment banks.
However, Banks are more than just a safe place where money can be kept and invested. They assist you to become financially resilient.
Types of Banks
- Retail Banks: These type of banks are created specifically for retail consumers. However some larger international financial institutions contain both retail and commercial banking divisions. Retail banks provide services for the general public. Other names for retail banking include personal banking or general banking institutions. Retail banks or personal banks or general banking institutions provide services such as checking and savings accounts, loan and mortgage services including car financing, and short-term loans such as overdraft protection. Other services of retail banks include customer credit card, foreign currency exchange, private banking and wealth management.
- Corporate Banks: These type of banks provide specialty services to their business clients, ranging from small businesses to larger multinational corporations. Corporate banks also known as Commercial Banks also provide credit services, cash management services, commercial real estate services, employer services, and trade finance.
- Investment Banks: Investment banks are commonly referred to as financial intermediaries. They provide clients with services such as underwriting and merger and acquisition (M&A) transactions.
- Central Banks: Central banks are responsible for regulating the capital and reserve requirements of their member banks. They ensure stability of a nation’s currency, manage inflation and monetary policy, and oversee a nation’s money supply. In general they are non-market based and unlike the other types of banks listed above do not provide services for the general public or corporations.
Checking Accounts vs Savings Accounts
Checking accounts are a type of basic bank account that provides the holder easy access to their money via withdrawals or deposits. These kind of accounts are typically opened online or in branch at a bank or credit union and can be used to pay bills, make purchases, receive money from friends, family, and employer.
Savings accounts on the other hand are a type of valuable financial tool used to separate your expendable income from the money you want to build and grow your emergency fund with. Savings accounts are the simplest and most effective financial tools that assist you towards financial freedom.
In conclusion, checking accounts are accounts where money used for expenses are kept, while savings account are used for keeping money you want to save.
Credit Unions are non-profit financial institutions consisting of members who are considered equal shareholders. Access to credit unions is by membership only and members have to be share a common bond with other members such as living or working in the same area, working for the same employer, belonging to the same trade union or other association.
Credit unions offer financial tools such as checking and savings account, loans, credit cards, access to ATM, and in-person banking. Credit unions are known for their higher interest rates and lower lending fees.