Savings and Checking Accounts

Savings accounts are a great place to keep money you don’t plan on using right away. You can use a savings account to save for a larger expense, for example a vacation or a car. Or they can be used as an emergency fund or a rainy day. Many parents open a savings account when their child is young, so there is a good chance that you already have one. If not, you can always start now. The great thing about this account is that it gains interest. In this case interest is a good thing and you’ll want to gain as much of it as you can in order to make the biggest profit possible. The longer your money sits in these savings accounts the more interest will be added. 

You are basically loaning the bank money and they are paying you for letting them use your money. This act of gaining interest on top of that interest over time is also called compound interest. Teenagers can look for a fee-free savings account. Many banks offer savings accounts for students. One of your parents might have to be on that account until you are 18. 

A checking account is probably not as important for younger people until they start having a steady income and recurring bills to pay. However, if you already have a part time job, it would be a good idea to open a checking account. Checking accounts are good because they give easy access to cash with checks and debit cards. For these accounts, maintenance and other fees may have to be paid, but they are usually low. Often they are free for students, but you need to inquire with your bank. This account can also be used to pay bills online or over the phone.

How to write a check: You have to order checks from your bank. Date the check, make sure that your handwriting is legible, sign at the bottom and recheck all information to make sure it is correct. You’ll also have to sign the check and write your account number directly beneath your signature. Flip over the check and sign it where it says “endorse here”.  Use your legal name. You can write “for deposit only” instead of your name. If you mail this check, put it into an envelope that is not seen through and write down the address, make sure your return address is also on the envelope. You can also make deposits using an ATM. If you have a card, insert your card into the machine, put in your PIN number, choose the button “make a deposit” and choose the account you want to make your deposit. 

Most people get their checking and savings account at one place. Research what bank or credit union you like. What is most important to you? Service? Convenience? Location?

Banks offer the convenience of having more branch locations, they are technologically advanced and offer a larger variety of products and services like CDs, Money Market, loan offers for homes, cars and credit cards.

Credit Unions are co-operatives, which means that they are owned by the members of the credit union itself. Members may have to pay an entrance fee when joining a Credit Union. They are a business, but consider themselves not for profit which usually means higher savings rates and lower loan rates. Credit Unions smaller size often offers more personal, individualized service. Check out your options and ask the institutions about their fees, offers and whatever is important to you.

There are other accounts that one could use, such as money market accounts, certificates of deposits (CDs), and mutual fund accounts. Money market accounts are a form of savings account that pays a higher interest rate than a normal savings account. This account would be good for a teenager if they have a significant sum of money that they can put into a money market account to earn interest and if they aren’t planning on taking that money out any time soon.

 CDs are also a savings account that pays a high interest. This account is different because you aren’t allowed to withdraw your money for a certain amount of time. You can open a 6-month CD, requiring you to keep all your money in for 6 months. The longer you keep the money in the CD, the more money you will make. This account would be a good idea when a teenager has a larger sum of money that they are certain that they can put away for a certain amount of time. For example, a down payment on a car that you plan on buying next year. 

Mutual fund accounts are a way of investing in the stock market. We will discuss the stock market in more detail later, but basically when you invest in stocks, you are buying a tiny fractional share of a company--like many of the companies you know and may use every day, like Apple, Google, Netflix or Coca Cola! A Mutual fund is a form of slightly less risky investment than investing in individual stocks. With mutual funds, investment money is pooled by a group of people instead of a person being alone. And the money buys shares of many different companies as opposed to only one. (There are also other mutual funds that invest in bonds rather than stocks.) Mutual funds can also earn a lot of returns. However you can lose a lot of that money if the funds don’t do well.

When there’s a recession or some other uncertain event like a war, the stock market can go down, even if it’s only temporary. Many people remember the terrible stock market crash of 2008, when the housing market in the US declined. Some people’s stock portfolios went down 50% or more! For most people, if they had the discipline to leave their money alone, the accounts recovered. But it was terrifying for many investors, and those who pulled their money out while the stocks were down, lost their money forever.

A mutual fund account can be an account to practice and start investing. You shouldn’t deposit money in a mutual account that you can’t afford to lose. To deposit money in any of these accounts, simply go to a nearby bank and talk to one of the customer service representatives, known as tellers. The teller will tally up the total amount of your deposit and help you through this process.

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