A working vocabulary is critical to financial success. Read this list over and over until you can explain these institutions to your co-workers, friends, and family. Teaching is the best way to reinforce learning and grow financial confidence.
- Commercial banks: A financial institution that accepts deposits, makes loans and provides other financial services to individuals and businesses. Think Bank of America, Well Fargo, and First Republic, to name a few.
- Credit unions: A non-profit financial institution owned and operated by its members, offering similar services as commercial banks. Think Alliant Credit Union or Consumer Credit Union
- Investment banks: A financial institution that provides advisory services and raises capital for corporations, governments, and other large organizations. I.e. JP Morgan, Goldman Sachs, UBS
- Insurance companies: A financial institution that provides various types of insurance products, including life, health, auto, and home insurance. Like Statefarm, Hartford, and Northwestern Mutual, there are 5,929 insurance companies in the USA, and in 2021, the U.S. Insurance industry’s net premiums totaled $1.4 trillion.
- Brokerage firms: A financial institution that provides investment services to individuals and businesses, including buying and selling stocks, bonds, and other securities. Robinhood is considered a brokerage firm. The big players are Vanguard, Charles Schwab, Fidelity, Bank of America (specifically Merrill Lynch), and J.P. Morgan, which manages trillions of assets and millions of accounts.
- Pension funds: A financial institution that manages retirement savings for employees, typically through investments in stocks, bonds, and other assets. One well-known pension fund is the California Public Employees' Retirement System (CalPERS). CalPERS is the largest public pension fund in the United States and manages the retirement benefits for California's public employees, including state, local government, and public school workers.
- Hedge funds: A financial institution with an investment fund that pools money from wealthy, institutional, and other sophisticated investors. To invest in a range of assets to generate high returns. BlackRock is one of the most famous runs by Larry Fink.
- Venture capital firms: A type of investment firm that funds start-up companies or other high-growth potential businesses. There are about 1,000 VC firms in the USA. They are known for lacking investment in companies founded solely by women. Last year women only garnered just 2% of the total capital invested in VC-backed startups in the United States.
- Microfinance institutions: A financial institution that provides small loans and other financial services to entrepreneurs and low-income individuals in developing countries. Microfinance allows owners in poor or rural regions to obtain small amounts of financing that would be difficult to get otherwise impossible.
- Payday lenders: A type of financial institution that provides short-term loans with high-interest rates, typically to borrowers who cannot access traditional credit. These are last resort options. The interest is very high and can quickly create serious debt.
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