Teens and Money: Checking and Savings Account
One of the first steps toward real freedom (and adulthood) is having a checking and savings account in your own name. These accounts allow you to save money, make purchases, and pay bills efficiently. Both, however, require you to take an active management role, so that you can achieve your goals and avoid errors.
Start a savings account
Getting into the habit of setting money aside regularly is the foundation for a successful financial future. Be sure to sign up for automatic transfer of funds when you open the account. Once done, saving will be a breeze. All you have to do is choose the amount you want deducted regularly from your checking account and deposited into your savings account.
If you save a portion of every paycheck, it won’t be long before you accumulate an impressive sum. Financial experts recommend keeping three to six months’ worth of expenses tucked away in a savings account as a cushion, because there is no tax consequence or penalty to take funds out. However, after you have built up enough to tide you over in the event of an emergency (job loss, unexpected car repairs, health problems, etc.) you can take the excess and begin to invest; your money will actually work for you instead of the other way around.
Managing a checking account
After you open your checking account, it is your responsibility to handle and monitor it correctly. This means knowing how much is in your account at all times, reading your statements for accuracy, and never writing checks or swiping your debit card for more money than you have in it.
Don’t “bounce” checks
Bouncing checks is serious and expensive business. If there aren’t enough funds to cover a check, or a swipe from a debit card, it will be rejected when it comes in for payment. In the case of a paper check, it will be sent back to the person who deposited it and you will be charged for “bouncing” it.
In the case of a debit card, your purchase could either be declined at the register, or if you have overdraft protection it will go through but you’ll be charged a fee for overdrawing your account. Then your account will be negative and you’ll get charged making it even worse.
You can avoid accidentally writing bad checks or over-drafting using your debit card by always knowing how much you have in your account. Keep track of using online banking and a mobile banking app. You can also sign up for text alerts to get a daily alert of your balance, or request your balance at any time.
Keep your account balanced
Always read your account statements (or log in to online/mobile banking) and compare your balance with what the financial institution says you have. If there is an item on your statement that is not listed in your check register, first determine if it is accurate. You may have forgotten to record something. If you believe the item is wrong, contact your financial institution to have it investigated immediately.
Managing all of your accounts well is important. If you do, you will you always have the security a savings account brings, and you won’t waste money on checking account mistakes. And remember, your credit union can be a valuable ally – with a good account record you can get a loan for a new car.