With so many choices on where and how to invest and save your money, it can be difficult to figure out what is going to work best for you and your financial goals. Sometimes it is helpful to have a no-nonsense guide to who and what financial institutions are and what they do.
Here is a break down of the most common banking options available so you can make an informed decision about where to put and keep your money.
Retail and Commercial Banks
Commercial banks are probably the first thing that comes to mind when they hear “financial institution”. Retail banks tend to work directly with consumers, while commercial banks deal with businesses, be it big companies or small businesses.
These banks tend to offer products like checking and savings accounts, very basic financial advice, credit cards, and various loans. They can either be large, nationwide banks or smaller, local ones.
These are similar to the above entry. However, instead of having physical locations they operate through an online platform. They offer most of the same products as retail and commercial banks. They can be a great option for people who move a lot or are based overseas.
These banks tend to serve a specific group of people like teachers, firefighters, or the military. They offer the same services as retail banks, they are owned by their members and primarily work for their benefit. They have been growing in popularity over the last few years as more and more civil rights attorneys have been taking on big banks in court and winning.
Savings And Loans
The name pretty much says it all when it comes to these financial institutions. Individual consumers can have deposit accounts here or use them for credit and loans. These are geared more toward consumers and can’t have more than 20% of their business come from businesses.
Mortgage companies either organize and fund loans for real estate purposes. While most focus on consumers and home buyers, a few focus on commercial real estate purchasing. Usually the only time you would deal with a mortgage company is when you are looking to buy or sell a property or a piece of land.
Investment Banks and Companies
Unlike most of the other entries on this list, investment banks don’t take deposits. Instead, they issue what are referred to as securities in a way to help individuals, businesses, and the government to raise money by gathering funds from investors thus granting them access to a wider securities market.
These financial institutions help consumers and other institutions with the purchase and sale of securities within a group of available investors. Customers who work with a brokerage firm can do things like trade stocks and bonds, mutual funds, and deal with alternative investments.
Just A Few Common Financial Institutions
These are just a few of the most common financial institutions and what they do. Before investing or depositing your money, make sure you research the company and see if there have been any questionable dealings in the past. After all, it is your future and money they are protecting.
For more tips on how to invest, check out our section our financial blog. It is packed full of great ideas on how to start and expand your savings for the future.