Now that you’ve been working for a while, you have to make the decision of where to put all your hard earned money!  While I used to suggest my wallet, being the honest person that I am, I realized doing so would ultimately cost me more money than it was worth in taxes, so please don’t put your money in my wallet!  Seriously, there are a lot of choices out there, and if you are young it seems like none of those choices are particularly GOOD ones.  So which is the best on the field?

I’m going to focus on two types of institution, banks and credit unions.  The truth of the matter is, there is relatively little difference between these two choices and any others that may be out there.  If you are familiar with another type of institution, maybe you work at one and are very familiar, please leave a comment with your e-mail, and we can get together to discuss your expertise.

Although the term, ‘bank’ is used interchangeably to define almost all types of institution, there are some very real, and very well-defined differences between actual banks and credit unions.  Most of these differences are transparent and philosophical, but others make compelling arguments to open your accounts either at one or the other institution.

Banks are companies, like the donut store or the clothing store.  They are there to make a profit, as are all of the employees, including the Board of Directors.  The advantage for the consumer is that you will usually have more services available, and you may have more locations available for you to do your banking.

Credit Unions are cooperative institutions that serve people who share a common bond, usually people who live in the same area or work for the same company.  Their Board of Directors are volunteers, and they are technically not-for-profit.  This usually gives the consumer access to better saving and loan rates, as well as having more of a sense of community with other consumers and the employees of the institution.  You trade these benefits for limited access, and the fact that most credit unions are not at the forefront of technology.

Of course, these differences are largely fading with changes being made by both major banks and the credit union segment.  For example, with the advent of the, “community charter”, the common bond aspect of credit unions is stretched pretty thin.  This type of charter allows anyone who lives, works, worships, goes to school, or is related to someone who fits in one of the above categories, to join.  Conversely, banks are increasingly afraid of the competition credit unions can provide, so they are now attempting to capitalize on the “community” aspect of most of their customers.

Other places where the differences are less noticeable are in the areas of rates and accessibility.  Since both institutions borrow money at the same rates, the margin that they pay their consumers for savings and those they charge for loans, is very thin.  Still worth shopping for, but thin.  Since credit unions are cooperative in nature, they are allowing the cooperation of their ATM services as well, creating very stiff competition for banks.

Most people choose an institution based on factors like; which institution their parents belong to, which one is closest to home or work, or which one offers the best opening gift.  While each of these may be important, they are not the only things to look at before you choose one type of institution.  The reality is that most of the institutions offer such similar products and services, that before you choose one, you should decide what is important to you in an institution.

For me, I want to be left alone by my bank.  Having worked at several institutions, I know what services I want, and I know how to access them.  Certain family members want to have a branch that is local to them with a friendly staff who knows them personally.  Others want to never have to walk into a branch, and prefer to only use e-services.

What do you look for in an institution?  Are you in the right institution?  Leave a comment on what is important for you, and I’ll respond with a general recommendation for a type of institution.

 -W

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Comments
  1. Bernard says:

    Where should you put your money also depends on what is your objective. If your objective is to “store” your money, then bank and credit union may be the option.
    If however, you are looking to let your money work for you, ie, generating more money, then you might consider investing them into shares, mutual funds or other form of investment which you are comfortable with. It is never too little to start investing.

  2. Wil says:

    Investing is fine for those who have the extra. I’ve posted since this one that talks about why I don’t advocate investing for youth. Check that one out. It’s titles “Why I Don’t Talk About Investing”. Thanks for the post.

  3. Jay Shah says:

    Hi this is Jay Shah
    There is a doubt which i will like to raise withu guys out there
    Can you please tell me that why dont people put all their money into banks inspite of the fact the interest gets compounded ,and after some years that amount will double
    so it will be really helpful if someone would help me out on this

  4. At you finance4youth.wordpress.com a good forum and you kind people. Help me to find sites please. Here the provisional task about what I should find sites.

    About site gives an opportunity to learn about Student loans
    .
    It is possible to find accessible both for the beginner and for post-graduate students the program which offers low interest rates and flexible plans of payment. Also for parents of not trained students of the dependent. This help of loans covers the increasing cost of higher education.
    the guaranteed government.

    Help me to find sites about Federal student loan consolidation

  5. Wil says:

    Usually I will not let these kinds of comments through, because I’m not selling your product, but I’ve eliminated any links, and I would like to ask anybody else who wants to leave a comment to please proof read their comments before submitting. If you have a link to sell a product, send me an e-mail to give me a chance to look at your product, and give me the consideration of not thinking compliments are enough to blind me to this type of practice.

    Thanks
    -W

  6. Kaushik says:

    True,banks are technologically most advanced and organized to help your business grow. Credit unions,on other hand act like NPO for a community of similar interest,if I’m not wrong.But I think hardly anybody in today’s low interest rate regime is much interested in putting their money invested in banks or credit unions.

  7. Wil says:

    Kaushik:

    Thanks for the comment!

    Keep in mind the focus of this site: Young people, especially in high school and college. At this stage, we want to keep things simple, without complications that many of us eventually wind up dealing with.

    Also, not all banks are advanced. Some credit unions are very progressive, and are doing things banks would be too afraid to touch!

  8. […] know about how WALMART AND 7-11 ARE TRYING TO SCREW THE CONSUMER.  She didn’t know about DIFFERENCES IN BANKS AND CREDIT UNIONS.  She, like many others, wasn’t aware of the BENEFITS OF DEBIT CARDS, or the DOWNSIDE OF […]

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