Where Should I Put My Money?

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