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Teach Your Teen About Financial Institutions

Millions of people use services offered by financial institutions on a daily basis to help them manage their money. Many types of companies offer financial services to consumers, and the complexity can be overwhelming to a young person just starting out. Helping your teen understand how financial institutions operate, what they offer, and how they differ from each other can set a solid foundation to build on as they get older and their knowledge grows.

1. Start with the basics.

Teens should know that some financial institutions offer accounts that accept deposits and the safety of those deposits is often guaranteed by the government. These types of accounts come with a range of valuable services such as online and mobile banking, checking accounts and debit cards, bill payment services, and automatic savings transfers. In today’s world, these types of services make it easy and convenient to spend and manage your money.

2. Important differences.

Commercial banks and credit unions are the most commonly used financial institutions. Although both offer a range of “banking” services, they are actually quite different in terms of their ownership structure and the types of consumers they serve.

Commercial banks are for‐profit businesses that offer financial services to both consumers and companies. Banks are usually the largest financial institutions and offer the widest variety of services to customers.

Credit unions are financial institutions that also offer banking services. But, unlike banks, they are owned by their customers, who are usually called members. A credit union has membership qualifications that require its members share a common bond such as the same employer, the geographic area in which they live or membership in an organization.

Credit unions are not-for‐profit organizations exempt from federal income tax. This feature often allows them to pay higher interest rates on deposits, charge lower interest rates on loans and charge lower fees, compared to banks and other financial institutions.

3. Explain about financial safety.

Stashing your money away in what you might consider a “safe” location within your home or having large sums of cash in your wallet is financially risky. If lost or stolen your money is most likely gone for good.

However, depository institutions offer secure storage of both cash and transaction data. Most importantly, deposits in most banks and credit unions are protected by insurance provided by two federal government agencies: the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA).

4. Financial Products

Like any business, a financial institution offers products for a price. The products are deposit accounts such as savings, checking, and certificates of deposit; money-management services such as online banking, mobile banking, bill payment, and wire transfers; and credit-based products such as auto loans, mortgages, and credit cards. The price for using these products is charged in the form of fees and interest.

5. Understand the fees.

Just as different retail stores may charge wildly different prices for the same types of products, different financial institutions may charge many different fees for their products. When choosing a financial institution, it’s important to know what fees will be charged for the services you will use. Since credit unions are not-for-profit financial institutions, they usually charge lower and fewer fees than commercial banks do.

Knowing these financial institution basics will give your teen a strong foundation for future money management skills.

Just for fun…

Use the links below to learn more about how credit unions were started, the ideals and values that shaped today’s credit union movement, and the differences between credit unions and banks.

Help us empower the next generation for financial success!

The Center for Financial Empowerment is a 501c3 nonprofit organization whose mission is to empower disadvantaged youth through financial literacy education. Find out more about our work.


Introduction To Depository Institutions, Take Charge Today, August 2013


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