Banking is defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to conduct economic activities such as making profit or simply covering operating expenses.

A bank is a financial institution licensed to receive deposits and make loans. Two of the most common types of banks are commercial/retail and investment banks. Depending on type, a bank may also provide various financial services ranging from providing safe deposit boxes and currency exchange to retirement and wealth management.

In the United States of America, banks are regulated by the U.S. Federal Reserve Bank which is one of the world's major central banks. Screen Shot 2023-02-20 at 11.06.29 AM.png

In 2017, the Federal Deposit Insurance Corporation (FDIC) conducted a U.S national survey to estimate the number of unbanked and underbanked American households. Survey executive summary revealed that approximately 8.4 million U.S. household or 20.5 million individuals were unbanked, which means no one in that household had a saving or a checking account.

Survey also indicated that approximately 24.2 million U.S. households or 64.3 million individuals were underbanked, which means the household had an account at an insured institution but also obtained financial products or services outside of the banking system.

But why is this important? Those who are unbanked or underbanked, are hindering their financial lives from enjoying services that lead to financial well-being. Many must resort to services outside the banking system to cash checks or borrow loans and incur higher transaction fees and interest unnecessarily. Here are some of the reasons why banking tops the list of pillars required in financial literacy.

Safeguard your cash
Manage your finances – record keeping and budgeting
Receive your paycheck quickly using direct deposit
Facilitate financial transactions
Insure your liquid assets
Use debit and credit card services
Earn interest
Borrow loans
Invest your money
Establish a credit history to generate a FICO credit score instrumental in borrowing funds and building wealth

For successful banking experiences, let's walk through the chapters below.

Chapter 1. Key terms you need to know

Chapter 2. What is a bank? What is a credit union?

Chapter 3. How to decide who should safeguard your money?

Chapter 4. What happens if you don't use a bank or a credit union?

Chapter 5. Tips and ways for students to get most of the banking experience

Test your knowledge!

This was made possible in partnership with The Singleton Foundation for Financial Literacy and Entrepreneurship. This video and more videos like this can be found on Millionstories.com.