Should I use a bank or a credit union for my savings account?
"Your instructor's numbers do not seem to have any basis in current reality. At this page you can see a comparison of interest rates offered by banks and credit unions.  In the most recent table for June 2014, banks paid an average interest rate of 0.12 percent on savings accounts, while credit unions paid an average of 0.13 percent.   If you look back further, you will see that interest rates paid by banks and credit unions are generally comparable.  Credit union rates tend to be a little bit higher, but certainly not 7 times higher. The last time any financial institution paid as much as 15% on a savings account would probably be the early 1980s.  You can see here a historical chart of the ""prime rate"" for lending.  Savings account rates (at either banks or credit unions) would typically be lower. (This is based on the US, in accordance with your tag.  Interest rates in other places, especially developing countries with less stable currencies, can be dramatically different.)" "In practical terms, these days, a credit union IS a small ""savings and loan"" bank -- the kind of bank that used to exist before bankers started making money on everything but writing loans. They aren't always going to offer higher interest and/or cheaper loans than the bank-banks, but they're almost always going to be more pleasant to deal with since they consider the depositors and borrowers their stockholders, not just customers. There are minor legal differences (different insurance fund, for example), and you aren't necessarily eligible to open an account at a randomly-chosen credit union (depending on how they've defined the community they're serving), but they will rarely affect you as an account holder. The main downside of credit unions is that, like other small local banks, they will only have a few branches, usually within a limited geographic area. However, I've been using a credit union 200 miles away (and across two state lines on that route, one if I take a large detour) for decades now, and I've found that between bank-by-mail, bank-by-internet, ATM machines, and the ""branch exchange"" program (which lets you use branches of participating credit unions as if they were branches of your own) I really haven't felt a need to get to the branch.  I did find that, due to network limitations of $50K/CU/day, drawing $200,000 worth of bank checks on a single day (when I purchased the house) required running around to four separate branch-exchange credit unions. But that's a weird situation where I was having trouble beating the actual numbers out of the real estate agents until a few days before the sale. And they may have relaxed those limitations since... though if I had to do it again, I'd consider taking a scenic drive to hit an actual branch of my own credit union. If you have the opportunity to join a credit union, I recommend doing so. Even if you don't wind up using it for your ""main"" accounts, they're likely to be people you want to talk to when you're shopping for a loan."
What worked out well for me is a Capital One High Yield Savings Account, which came with a lower interest rate than most online accounts but higher than a brick & mortar bank. Also, since Capital One has Banking locations now, I can use the ATM card that came with this account to pull out the emergency money if I need it in a pinch at a place that doesn't accept checks. The Livret A is a very specific product. It's tax-exempt and would historically not be available through regular banks. Commercial banks can now offer it but they only collect the money on behalf of the Caisse des dépôts (CDC). The CDC then pays interest to the savers and a commission for the bank. The commission is baked into the system, not charged to the customer directly but since the interest rate is set centrally, banks cannot compete on that. So this is risk-free money for them (but on the flip side it does not help them meet capital adequacy requirements). Other savings account or products have different rules. Another angle to consider is that a livret A was historically very attractive for consumers (and was certainly perceived as such) so that many people would have a checking account at a regular bank and another account at the Caisse d'épargne or the Banque postale just to open a livret A. For commercial banks, the alternative therefore isn't having your money on your checking account vs. your livret A or another savings account, it was having your money on a livret A they administer vs. seeing you run away to another institution. There is also a cap on the livret A and you're not allowed to save more money by opening several of them at different banks. At the same time banks have been complaining that the decrease of the interest rate (and consequently of their commission) makes the whole scheme a lot less interesting for them. For what it's worth, I recently (re)opened a bank account in France after living abroad for a long time and the customer advisor did not seem particularly interested in pushing a livret A. "Current is another word for Checking, as it is called in the US. Savings account is an interest-bearing account with certain limitations. For example, in the US you cannot withdraw money from it more than 6 times a month. Here is the explanation why. Current account is a ""general-use"" account on which you can write checks, use ATM/Debit cards and have unlimited transactions. It can also have negative balance (if your bank agrees to let you overdraft, they usually charge huge fees for that though). Checking accounts can have interest as well, but they usually don't, and if they do - it's much lower than the savings account interest." Keep your account with Navy Federal, once you get an account at a good credit union keep it.  Look for a credit union the students can join, it may be based in the town where the campus is, or one related to the school.  Look for a free ATM on campus. Many times it is near the food court or student union or bookstore. If there is none ask the university to get one.  If you don't find a local credit union you should be able to deposit the checks via scanner or phone to navy federal. Personally, I keep two regular checking accounts at different banks.  One gets a direct deposit totaling the sum of my regular monthly bills and a prorated provision for longer term regular bills like semi-annual car insurance premiums.  I leave a buffer in the account to account for the odd expensive electrical bill or rate increase or whatever.  One gets a direct deposit of the rest which I then allocate to savings and spending. It makes sense to me to separate off regular planned expenses (rent/mortgage, utility bills, insurance premiums) from spending money because it lets me put the basics of my life on autopilot.  An added benefit is I have a failover checking account in the event something happens to one of them.  I don't keep significant amounts of money in either account and don't give transfer access to the savings accounts that store the bulk of my money.  I wear a tinfoil hat when it comes to automatic bank transfers and account access... It doesn't make sense to me to keep deposits separate from spending, it makes less sense to me to spend off of a savings account. Credit unions operate for the benefit of their depositors, who are the actual owners of the institution, whereas conventional banks operate for the benefit of their shareholders, who of course are not necessarily depositors. So credit unions will typically give a benefit or service for free if it is free or extremely cheap to them, whereas conventional banks will charge for it if they think it will not lose them depositors. "Here are some things you want to look at for evaluating a bank or credit union for your regular spending accounts: Convenience.  Do they have a branch in a convenient location for you?  Do they have no-fee ATMs near you? Website.  If you are like me, you will spend more time on the bank's website than you do inside a branch.  Some bank's websites are great, some are terrible.  Unfortunately, this is generally difficult to evaluate until you actually get an account.  You want a website that is easy to use.  It should allow you to easily move money between your accounts, get instant lists of transactions, show you your monthly statements, and have a billpay feature that works well.  If you use budgeting software that interfaces online with your bank, you want to ensure that it works well with your bank. Fee structure.  Some banks will nickel-and-dime you to death.  Watch out for minimum balance fees and ATM fees.  Banks and credit unions usually have a fee schedule page on their website that lists every fee they charge, making it easy to compare different banks.   I would not be very concerned about interest rates for savings.  Currently, all savings accounts have a universally terrible interest rate.  Therefore, I wouldn't base my bank choice on the interest rate.  Sure, one might offer double the interest rate of another, but double ""next-to-nothing"" is still ""next-to-nothing.""  When you accumulate enough savings that you want to start maximizing your earnings, you can look for a better rate at another bank to move your savings to, and you can keep your checking account at the bank with the best convenience and fee structure. In my limited experience, I have had better luck with credit unions than with banks when it comes to fees." "There's a lot of personal preference and personal circumstance that goes into these decisions.  I think that for a person starting out, what's below is a good system.  People with greater needs probably aren't reading this question looking for an answer. How many bank accounts should I have and what kinds, and how much (percentage-wise) of my income should I put into each one?  You should probably have one checking account and one savings / money market account.  If you're total savings are too low to avoid fees on two accounts, then just the checking account at the beginning.  Keep the checking account balance high enough to cover your actual debits plus a little buffer.  Put the rest in savings. Multiple bank accounts beyond the basics or using multiple banks can be appropriate for some people in some circumstances.  Those people, for the most part, will have a specific reason for needing them and maybe enough experience at that point to know how many and where to get them. (Else they ask specific questions in the context of their situation.) I did see a comment about partners - If you're married / in long-term relationship, you might replicate the above for each side of the marriage / partnership.  That's a personal decision between you and your partner that's more about your philosophy in the relationship then about finance specifically. Then from there, how do I portion them out into budgets and savings?  I personally don't believe that there is any generic answer for this question.  Others may post answers with their own rules of thumb.  You need to budget based on a realistic assessment of your own income and necessary costs.  Then if you have money some savings.  Include a minimal level of entertainment in ""necessary costs"" because most people cannot work constantly.  Beyond that minimal level, additional entertainment comes after necessary costs and basic savings.  Savings should be tied to your long term goals in addition to you current constraints. Should I use credit cards for spending to reap benefits? No. Use credit cards for the convenience of them, if you want, but pay the full balance each month and don't overdo it.  If you lack discipline on your spending, then you might consider avoiding credit cards completely." Credit Unions are structured such that the account holders are in fact the owners of the institution. Thus, the money invested in your savings account is in fact a share of ownership, and the interest paid to you is dividend. Tax-wise, these dividends are usually treated as interest income. Why don't people switch banks?  It's honestly not that hard.  Once I switched to a local credit union, I'll never use a big bank again.  The service is amazing and there are pretty much no fees for anything. Besides, if you don't like how your Credit Union is investing your money, you can always agitate for change by asking members to change the board that governs it. Being a member of a Credit Union gives you a vote on how the institution runs itself. You're asking for opinions here, which is kindof against the rules, but I'll give it a try. 1) Does emergency funds and saving money(eg.Money plan to buy a       house) should be in same Saving Account? 2) or should each specific saving plan set up in particular Saving Account? No, it doesn't. It's a matter of convenience. I personally find it more convinient to have different stashes for different purposes, but it means extra overhead of keeping an eye on one more account. Fortunately, with on-line access, mint.com and spreadsheets, it's not that big of an overhead. 3) If saved in same Saving Account, how could I manage easily which       percentage is planned for which? Excel spreadsheet comes to mind. Banks may have some tools too, for example Wells Fargo (where I'll be closing my account soon), has a nice on-line goals manager that allows you to keep track of your savings per assigned goals (they allow one goal per savings account, but you can have multiple accounts for multiple goals, and it will show the goals and progress pretty nicely). 4) If not saved in same Saving Account, the interest earned would be smaller because they all clutter across multiple Saving Accounts? In some banks interest rates are tiered. But in most on-line savings accounts they're not, and you get the same high rate from the first $1 deposited. So if in the bank where you keep the money they only pay a decent rate if you deposit some big lump of money - just open an account elsewhere. Places to check: American Express FSB, ING Direct, E*Trade savings, Capital One, Ally, and many more. Nope.  Credit Unions are for the customers.  Since the customers own them, the credit union does what is best for the members.  They aren't giving you money, they are loaning it to you for for interest.  Furthermore then judged you like any other bank would. High horse moment: I believe the only reason you have to open an account, is because the banking industry didn't want to compete and got legislation to limit the size and reach of a credit union.   The credit union wants your business, and they want to work for you, but they are required to have these membership requirements because their lobby isn't as powerful as regular banks. There is very little difference these days between account types. The fee structure and interest paid is different, but the actual mechanics, and as noted by others, the coverage by deposit insurance is identical. So look at how much money you have in the account(s) you have; are you maximizing the interest that you could be receiving, even from the small amounts that the banks will pay? If you could get more interest from the savings account, and only write one or two cheques per month, you might be better off with that account only; but given common fee structures, you likely would not want that as your primary account. Another reason for separate accounts is more psychological.  You might be able to train yourself to not dip in to your savings if you don't have a chequebook. I keep several savings accounts. I use an online-only bank that makes it very easy to open a new account in about 2 minutes. I keep the following accounts: Emergency Fund with 2 months of expenses. I pretend this money doesn't even exist. But if something happened that I needed money right away, I can get it. 6 6-month term CDs, with one maturing every month, each with 1 month's worth of expenses. This way, every month, I'll have a CD that matures with the money I would need that month if I lose my job or some other emergency that prevents me from working. You won't make as much interest on the 6-month term, but you'll have cash every month if you need it. Goal-specific accounts: I keep an account that I make a 'car payment' into every month so I'll have a down-payment saved when I'm ready to buy a car, and I'm used to making a payment, so it's not an additional expense if I need a loan. I also keep a vacation account so when it's time to take the family to Disneyland, I know how much I can budget for the trip. General savings: The 'everything else' account. When I just NEED to buy a new LCD TV on Black Friday, that's where I go without touching my emergency funds.