What is a Financial Institution? A Simple Explanation for Kids, Teens and Beginners

What is a Financial Institution: Finance 101? Easy Peasy Finance for Kids and Beginners

Introduction to Financial Institutions for Kids and Teens

This video explains the concept of a financial institution in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about financial institutions, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

What is a Financial Institution - A Simple Explanation for Kids Teens and Beginners
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:

What is a financial institution?

Financial Institution for Kids Teens and Beginners
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A financial institution is a type of company that is part of the financial services sector.

Financial institutions provide money related services like deposits, loans, investments, insurance, etc.

There are many types of financial institutions, and most people interact with them regularly. Retail banks, credit unions, insurance companies, brokerages, and investment banks are some examples of financial institutions.

What do people use financial institutions for?

People and companies use financial institutions to deposit and borrow money, protect against monetary loss, transfer money and make payments, and invest in different asset classes.

Financial institutions are such an integral part of everyday life that when major financial institutions go bankrupt, it leads to widespread panic – often requiring the government to intervene.

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Are financial institutions regulated by the government?

The health of financial institutions directly impacts the overall health of the country’s economy.

Since financial institutions handle peoples’ money, they are under strict regulation by the government to ensure consumer protection and economic stability. The government needs to make sure people have confidence in the financial institutions they are dealing with. 

How does the government achieve this?

Financial Institution - Government Regulation and Stability
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The government uses a combination of strategies to achieve this.

For example, banks are required to keep a certain percentage of deposits as cash at all times so they don’t run out of money if a lot of people want to withdraw at the same time.

The government also uses measures like insuring bank accounts through FDIC so that people do not lose all their money if a bank fails.

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: What is a Financial Institution

What is a Financial Institution
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