Money-Saving 101: Banks And You
When trying to choose the best way to save, different methods can be daunting and sometimes confusing. One of the best ways is through banking. But people are often confused about banks and how they work. How do you start saving money? How many accounts should you actually have? What’s a checking account and how different is it from a savings account? These are all questions people trying to save money have.
Opening up a bank account for the purpose of saving money will give you an opportunity to have that money kept safely, and more importantly, prevent the temptation of you spending that money away.
Jacqui Park, a financial adviser for Honest Money, says that “There’s no time like the present” when it comes to saving money for the long run. So what are the different accounts you can have and how do you understand the terms used in banks? Read on to find out more.
1.Basic Savings Account
A basic bank account is for you if you simply need to have your money stored away in a safe place. A basic savings account will require you to keep a minimum balance inside that account. Having a savings account will allow you to receive a salary or benefits through the bank or pay bills.
Some banks will also grant you a debit card so you can easily access your money through an ATM or use that card to pay directly, cash-free. Having a savings account will give you an opportunity to build up a good credit history with the bank thus becoming one of their valued customers and giving you access to exclusive packages.
The best idea for starting a saving account is to start small. Think of your finances and how much you owe monthly and then how much can you save without pinching yourself too much. A savings account is a good starter for a beginner.
A checking account is a type of bank account which will allow you to write checks and use that to pay for any goods or service. The great thing about a checking account is also the freedom of having to carry large sums of money. People with transactions worth thousands to millions will usually avail of a checking account and the person that they issue the check to will only need to go to the bank and cash it in, but it must be on or before the written date of the card.
A checking account is designed to keep your money for the long-term. There are re-limits to monthly withdrawals and this will depend on your credit with the bank. A few notes to remember about checking accounts:
– The bank will charge you a sum of money if you fail to meet the required balance
– Any bounced cheque will immediately earn you bad credit with the bank
– You will earn an annual interest based on the balance that you keep in your account
A packaged account is a current account that comes with a good or service that you need to pay a monthly fee for. A packaged account will usually offer car coverage, travel insurance, ID fraud insurance, and home insurance. However, most experts advise on reading the fine print fully before signing up for this type of account.
Watch out for some companies that charge way higher for a particular good or service so instead of you spending just what you need, you might actually end up paying more for what could be bought separately and at a much lesser price. Another thing to look out for is the coverage of the packages and do you really need it.
Things to ask yourself:
– Is this insurance enough to cover me?
– Could I get the services separately or elsewhere for less?
– How many of these do I really need?
4.Jam Jar Accounts
Jam Jar Accounts are designed so it will make it quite harder for you to withdraw your money. No matter what your financial situation, it is always advisable to have a certain amount of money aside for emergencies. The Jam Jar approach will see you put money in, but not take it out.
In order for this saving method to be successful, you first need to draw up a monthly budget and figure out where you spend your money, which includes bills and other necessary payments like car loans or insurance.
Setting up a separate bank account for this type of method means that a certain amount of cash will automatically be saved for you by your chosen bank. You can also have them set-up an automated paying method for your bills and other utilities. This method ensures that you have as little contact with your money as possible and it makes sure that bills get paid on time.
A student account is designed for students who rely on allowance to save up money. Banks encourage students to open up a savings account with small amounts of balance needed and are good for the duration of the child’s education. They then use that money to invest or to grant loans to other people which in turn will help the students invest and earn annual interest from a small amount of money.
A student account, however, is strictly limited to students and the money will be released once the student graduates. Furthermore, keeping a student’s account will help a student through unexpected times and situations wherein an emergency fund will be needed like car breakdowns and school fees.
Most people, especially during this pandemic, have been living paycheck to paycheck, and if this is you, then you are not alone. Most people are put off by saving because they think of it as extreme dieting, either go all in or not at all. The best way to start training yourself to save is by learning to say no to little things like overpriced coffee, limiting your avocado toast to once every two months, or just learning to cook at home to save more money.
Know where you’re at, what your assets are, and how much is your debt, look at your cash flow and what you’re spending too much on, and lastly, set up your goals. Why do you want to save? It’s always a good idea to have an inspiration in mind.