If your kids are reaching the age where they’re ready to open a savings account, they may be aware that the word “bank” has some negative associations associated with it.
The repercussions of the financial recession are still reverberating through the culture, and the reputation of big banks have not fully recovered. So if your eager young savers are wondering why they should trust their hard-earned allowance to a bank, you can explain that a credit union isn’t a bank.
But how do you explain to kids that a credit union is so much more?
What is a Credit Union?
Well, a credit union is a not-for-profit financial cooperative, so its foundational principles include things like helping the community and educating members. But that’s a difficult concept for a kid to understand.
So keep it simple.
Tell them the credit union is a friendly place where people come together to help each other save and lend money. And unlike a bank, a credit union doesn’t want to take your money and use it to make more money for people far away on Wall Street. Instead, the credit union is there to help them—and their friends and neighbors—make good money decisions.
Ultimately, a credit union exists to make them and their community stronger.
For those who desire to know more details…
You’ve probably heard of banks, but you might not be as familiar with credit unions. They are financial institutions too, but are not-for-profit organizations owned by all of its members versus for profit organizations owned by a handful or small group of individuals. Credit unions focus on helping their members save and borrow and receive affordable financial services.
Usually, credit unions offer higher savings rates, which is important to young people just starting their savings accounts. Credit unions typically charge lower fees compared to banks and are known for providing personal service and helping members plan for the future.
The credit union philosophy is members helping members. Many members of credit unions like knowing their savings will help other members get mortgages to buy homes and loans for new cars.
Credit unions, called by various names around the world, are member-owned, not-for-profit financial cooperatives that provide savings, credit and other financial services to their members. Credit union membership is based on a common bond, a linkage shared by savers and borrowers who belong to a specific community, organization, religion or place of employment. Credit unions pool their members’ savings deposits and shares to finance their own loan portfolios rather than rely on outside capital. Members benefit from higher returns on savings, lower rates on loans and fewer fees on average.
Credit unions worldwide offer members from all walks of life much more than financial services. They provide members the chance to own their own financial institution and help them create opportunities such as starting small businesses, growing farms, building family homes and educating their children.
From the outside, banks and credit unions seem very similar. They both offer checking and savings accounts, financial products like CDs and specialized accounts, and the rest of the services we’ve come to expect. You drive through teller windows or stop in at a branch, deposit your checks or withdraw money, and occasionally meet with personnel to discuss your financial needs. ATMs, debit and credit cards, loans and mortgages are all on the menu at most banks and credit unions. You give them your money, and they give it back. Right?
But under the surface, the two types of financial institutions couldn’t be more different. You may have noticed how excited and involved credit union (CU) members tend to be with their institutions, or the reputation CUs have for being small, regional or community-oriented.