Banking Basics: Why you Should Have Savings and Checking Accounts

Saving money is a great financial habit to develop, but the challenge comes with deciding where to keep that money. Some people prefer to keep their savings at home which is a big mistake. Keeping your savings at home may seem like a convenient option since it is easily accessible. However, it is not a wise financial decision. One of the significant disadvantages of keeping cash at home is the lack of interest earned on the money. By not earning interest, you are missing out on the opportunity to grow your savings.

Another downside of storing your savings at home is the risk of loss or theft. You may have the most secure hiding spot, but natural disasters, fire, or theft can wipe out your savings in an instant. The risk of loss or theft is too high to justify the convenience of keeping your money at home.

On the other hand, opening a bank account is a smart financial move. Banks offer safe and secure options to store your savings, along with other services that make it easy to manage your money. One of the primary advantages of having a bank account is the interest earned on your savings.

Savings rates and CD rates are higher these days than they have been in the past dozen years. In fact, right now you can easily find bank CD rates and savings account rates above 5.00 percent.

Furthermore, banks offer convenience in managing your finances. You can make deposits and withdrawals easily, pay bills online, and use a debit card for transactions. Additionally, opening a bank account is a smart move for anyone looking to establish credit, as banks can offer credit products such as credit cards and personal loans.

There are different types of banks to choose from, including traditional banks, credit unions, and online-only banks. Traditional banks offer the advantage of having a physical branch where you can interact with bank personnel. Credit unions, on the other hand, offer membership to individuals based on shared interests or affiliations, such as living in the same community or working in the same industry. Finally, online-only banks offer the convenience of managing your money entirely online, without the need to visit a physical branch.

Documents Needed to Open a Bank Account

To open an account in person, you need to provide two forms of identification such as your Social Security card, state-issued driver's license, state identification card, passport, or birth certificate. Non-US citizens can use identification issued by their country such as a passport. You also need to bring a utility bill or lease agreement that verifies your name and address. You have to complete an application and signature card, and provide the initial deposit, which can be cash, a money order, a check from another account, a transfer using routing and account numbers from another account, or a direct deposit from your employer.

To open an online account, you need an email address, a legitimate postal address, your Social Security number, and your driver's license or state identification number. You also need to agree to certain rules or terms for the account. The initial deposit can be provided using debit card information or routing and account numbers from another bank account you own or direct deposit information from your employer.

Once your account is opened, it's crucial to manage it well. You need to keep track of deposits, withdrawals, and payments from the account. Checking your balance isn't enough; you need to ensure that the correct amounts are being deposited to your accounts and that any withdrawals or payments are accurate. This is important to avoid overdraft fees, know where your money is going, and ensure the records and account balance are correct.

In conclusion, while keeping your money at home may seem like a simple and convenient solution, it is not a wise financial decision. By opening a bank account, you can earn interest on your savings, access various banking services, and ensure the safety and security of your money. It is essential to understand the different types of banks available to determine which one suits your financial needs and goals.

Author: Brian McKay
April 8th, 2023