A Kids Guide to Banks and Credit Unions
Banks keep your money safe and provide a variety of financial services. Credit unions are very similar to banks, but they are not-for-profit institutions owned by their members.
Whether you are ready to open a savings or checking account for your child, or you just want them to know where they will manage their money in the future, share this article with them to help them learn more about banks and credit unions. Both banks and credit unions help people store, manage, and access their money safely. But there are some differences between banks and credit unions, and even between regional or national banks and community banks.
What Are Banks and Credit Unions?
Banks and credit unions are businesses that keep your money safe and offer a bunch of different financial services. People visit them to deposit money, withdraw (take out) money, open checking and savings accounts, apply for a loan, and more.
When it comes to banks, there are two types. Large regional and national banks have branches in many different locations. Smaller community banks have only a few branches in one specific area.
Credit unions are similar to banks in the products and services they offer. The main difference is that they are owned by their members. Anything the credit union earns, they reinvest in members – in the form of lower fees and better loan and savings account rates – or in their communities.
So, what are the key differences between these money-managing organizations?
National/Regional Bank | Community Bank | Credit Union | |
Owned By | Stockholders/investors | Local owners/investors | Members |
For Profit? | Yes | Yes | No |
How Profits Are Used | Shared with stockholders | Reinvested in the community through loans and other financial services for local individuals, families, and small businesses |
|
| Extensive Financial Products and Services? | Yes | No | No |
| Close Relationships With Customers/Personalized Service? | Less likely | Yes | Yes |
| Actively Involved in Local Community Organizations and Activities? | Sometimes | Yes | Yes |
| Credit and Loan Eligibility | Strict eligibility requirements | Works with all customers, even those with imperfect credit | Works with all members, even those with imperfect credit |
| Savings Interest Rates | Tend to be lower | Tend to be higher | Tend to be higher |
| Fees | Tend to be higher | Tend to be lower | Tend to be lower |
| Deposits Insured? | Yes | Yes | Yes |
| Technology | Advanced technology and comprehensive mobile apps | Technology that might not be as advanced as big banks | Technology that might not be as advanced as big banks |
| Online Banking | Yes | Yes | Yes |
| Membership Requirements? | Typically no | Sometimes | Yes |
Banks and Credit Unions: A Recap
So, you’ve learned the similarities and differences between big banks, community banks, and credit unions and how they all keep your money safe and easy to manage. Each has advantages, depending on what you need and how you want to manage your money. They all work to help your family and neighbors do more with their money.
Now you’re ready to talk to your parents about setting up your own checking and savings accounts, getting a debit card, using ATMs, and managing your money like a pro at your family’s bank or credit union.
Learning all about banking now can help you make smart decisions with your money. There’s much more to learn about earning money, saving, creating a budget, setting up an account, and more. We’re happy to help, and we encourage you and your parents to reach out.
