Where is the best place to save money in Americas Economy?

English 2116-001 Research Investigative Report Zachary Thornton

Abstract
America has a capitalism economy which is based on the constant spending of the consumers. This free economy allows consumers to spend or save their own money. For the young adults where is the best place to save money at? The two most commonly used places are credit unions and conventional banks. What is the best place for a young adult to save their money in?

Table of Contents
Tables and Figures ........................................................................... Error! Bookmark not defined. Definitions of Economic Terms ........................................................ Error! Bookmark not defined. Introduction ..................................................................................... Error! Bookmark not defined. How does the U.S. economy Work? ................................................ Error! Bookmark not defined. Methodology................................................................................................................................... 3 Checking and Savings Accounts ...................................................................................................... 3 Credit Unions .................................................................................................................................. 4 Conventional Banks ........................................................................................................................ 4 Results ............................................................................................................................................. 5 Discussion........................................................................................................................................ 6 Conclusion ....................................................................................................................................... 6 Works Cited ..................................................................................................................................... 7

Page |2

Tables and Figures

Table 1 ........................................................................................................................................... 5

Definitions of Economic Terms

Business Cycle The constant changing of Americas economy from the economic expansion to weak economic depression. Economic Expansion - Where unemployment is down and businesses are doing well and are expanding. Economic Depression - Where unemployment is high and businesses arent doing well. Shareholders (often referred to as stockholders) a person, or business that buys a minimum of one share in a company APY Acronym that stands for Annual Percentage Yield It is the annual rate of return for an account in a financial institution.

Introduction
The US economy is well known for its good times and bad times. The constant change leads to constant worrying of the consumer. We the people are constantly trying to prevent economic downfall as it leads to poor conditions of things. We all need to save money so when the bad times come then we have backup money to help get by. The best way for us to prepare for such economic downfall is to save up our money in financial institutions.

How does the US Economy Work?

In order to understand about saving money in the US economy, one must first understand how it works. The US has a Capitalistic economy. Capitalism is like the game of Monopoly where individuals are able to successfully own business and expand to gain more business while still able to make a profit.

Page |3

The US economy is based mainly on its Gross Domestic Product, GDP. The Gross Domestic Product is a mathematical analysis that measures the US economy based on how much it produces. It is measure every quarter of the year so it is measured a maximum of 4 times a year. The numbers are based on the final products created in the US. An example is a gun for the US military; it has multiple parts created but it only matters when they are all assemble together.

The GDP is used to determine the US economic status with the economy of other nations. It helps show how fast or how slowly each nations economy is growing. The GDP is also used to compare how the US economy compares to its last quarter or the same quarter a year before to see if its growing more rapidly or slowly.

Methodology
My research for this project was based on looking up the local credit unions and conventional banks around my area. Thankfully each credit union and bank had their own websites with detail information on how they operate and their current rates. The main thing I looked for were the rates for checking and savings accounts and the eligibility to apply for one for each bank or credit union. The reason why I chose this method is because it is the best way for me to gather the right information I needed to explain my research. The information I gather is very reliable as it is coming from the banks themselves.

Checking and Savings Accounts

Thats to the Capitalism system of the US economy we citizens are free to choose to do what we want with our money. One of the best and most common ways to save money in the US is to put them in bank or credit union. The money can be place into a checking or savings account. A checking account is an account setup in a financial institution where people are able to deposit their money into instead of having to carry it around. This is very beneficial for not only the consumer

Page |4

Credit Unions
Credit Unions are non-profit financial institutions that offer loans and take in deposits. They are regulated by the federal government but are operated by their own members. They only operate in local areas and have no connections with one another except for government regulation. There services only apply to their members local area. Every member has to meet certain requirements in order to join. The requirements to join a credit Union vary by the type of credit Union. Some credit Unions are formed from a church group or by government workers. They will only accept new members if they are a part of the Church or if they work for the same government. The broad requirements can be summarize by the following: 1. Be a resident of the local servicing area, 2. Be officially employed Have employment with a company, business, school, etc.. 3. Be a member of a local organization a Church group, homeowner association, etc... Compared to a conventional bank: Pros: When compared to regular banks, the Credit Unions normally offer higher interest rates on returns and lower interest rates on loans then banks as they are non-profit and therefore avoid paying taxes. Also during the 2007 credit crises most of the credit Unions didnt suffer at all. Cons: Credit Unions lack the financial backing power that Banks have. Credit Unions also have low levels of staffing and operating budgets. Banking companies have banks at multiply locations making them more convenient to people more than credit unions.

Conventional Banks
Banks are financial institutions that also offer loans and take in deposits but are not non-profit. Banks are regulated by the Federal Government and are controlled by shareholders. There are different numbers of shareholders per bank. Each shareholder has a certain right or vote within what the bank does and what it doesnt do. The Shareholders seek to aim their own interest by trying to make the most profits out of the bank. This usually means that the interest rates on checking and savings accounts are low and their interest rates on payments from loans are high.

Page |5

Compared to Credit Unions Pros: Conventional Banks have more location than credit Unions. Every city or town has at least a few conventional banks making them more convenient. Banks have more finaical power making them able to insure their clients and their bank accounts. Also banks have multiple products to give their consumers. Cons: Conventional banks have lower interest rates when paying back consumers in savings and checking accounts. Banks also have a problem of bad loaning which is what caused a lot of them to recently go into financial meltdown. Banks are designed to give out a bad loan every now and then but due to the banks low levels of eligibility for accounts many people start taking out loans and couldnt afford to pay them back.

Results
For my research I looked at two specific financial institutions in my community; one credit union and one conventional bank. The two main services I looked at out of each banks were their checking and savings account and their rates associated with each one.

Comparing Rates Credit Union Account Type State Employees' Credit Union APY % Savings/Share Checking Rates are subject to change daily
Table 1 Compares the interest rates for both checking and savings accounts of State Employees Credit Union and Fifth-Third Bank.

Conventional Bank Fifth-Third Bank APY % Ranges Ranges if over $10,000 0.03 to 0.05 0.00 to 0.10 0.7

1.00/1.01 0.25

Page |6

From these results you can see that the State Employees Credit Union has a more consistent rate for both checking and savings accounts. Fifth-Third bank on the other hand has different values for its rates. The section for the checking account underneath Fifth-Third explains that in one specific account if a person puts in a minimum of $10,000 they will get the 0.70 % APY. Also credit unions called their savings account as a share since each member is like a shareholder and holds a vote in what that credit union does.

Discussions
From my research and results I have found out that there is a lot of variation involved in the checking and savings accounts of both credit unions and conventional banks. There ii a lot more involved when it comes down to choosing which institution to save money. While the credit unions tend to have higher APY than conventional banks they lack some additional options than what the banks do.

Conclusion
The difference in options makes it very challenging to decide which institution is the best choice right now for young adults. The different accounts have different benefits to them outside of just plain saving. From what I can say about my research is that the best solution to save money is to understand what you are saving for and how much you plan on putting in a savings or checking account. Once you understand your criteria research the local banks and credit unions and learn about their different rates and options for accounts.

Page |7

Works Cited
Mark Kolakowski Credit Unions financialcareersabout.com, About.com n.d. Web. 15 Nov. 2011 Kimberly Amadeo How Does the U.S. Economy Work useconomy.about.com, About.com, n.d. Web. 15 Nov. 2011 n.p. What is a Credit Union investorguide.com 2011. Web. 27 Nov. 2011 n.p. investopedia.com, Investopedia 2011. Web. 27 Nov. 2011 n.p. 53.com Fifth Third Bank 2011. Web. 20 Nov. 2011 n.p. ncsecu.org State Employees Credit Union 2011. Web. 20 Nov. 2011