Financial Literacy Checking and Savings

CHECKING AND SAVINGS ● CHECKING ACCOUNTS ○ A checking account is a deposit account at a bank, credit union, or online bank that allows one to easily deposit, withdraw, and transfer money. They are intended for everyday use - this means paying bills, making purchases, and covering other expenses. ● SAVINGS ACCOUNTS ○ A savings account is a deposit account at a bank or credit union that allows one to store money and earn interest. The main purpose of a savings account is to encourage people to save money over time. ○ Types of Savings Accounts: ■ Traditional Savings Account: A deposit account offered by banks and credit unions that allows customers to deposit money, earn interest, and withdraw funds when needed. ■ Online Savings Account: Similar to a traditional savings account, but can offer higher interest rates (due to the lack of expenses of operating buildings/physical locations). ■ Certificate of Deposit: A type of account that locks up your money for an agreed amount of time. Usually pays a higher rate than other options. ■ Money Market Account: Interest-bearing account, can open at banks and credit unions. A middle-ground between checking accounts and savings accounts - you can write checks and withdraw from this account but might incur fees if you do this too much. Interest rate between 0.01% and 3.45%. ● FDIC INSURANCE ○ The FDIC, or Federal Deposit Insurance Corporation, provides deposit insurance to protect your money in the event of a bank failure. ○ Customer deposits are insured to at least $250,000. ● SAVINGS v. CHECKING ○ Typical analogy: Checking is a “for now” account, and savings is a “for later” account. FEATURE Primary Purpose SAVINGS ACCOUNT Saving money for future use CHECKING ACCOUNT Everyday transactions and bill payments Interest Rates Typically higher than Typically very low or none checking accounts, depends on the type of savings account Accessibility Limited withdrawals per Unlimited transactions month Fees May have monthly fees or May have monthly fees, fees for excess withdrawals overdraft fees, or ATM fees Sometimes available but not Commonly provided for common everyday use Check-Writing Generally not available Yes, ability to write checks Minimum Balance Often required to avoid fees May have minimum balance Requirement or earn interest requirements to avoid fees Debit Card Security/Insurance Insured by FDIC Insured by FDIC Online/Mobile Banking Available for monitoring and Available for a wide range of transfers transactions Ideal for emergency funds Ideal for regular expenses, and savings goals managing daily cash flow Usage ● OVERDRAFT FEES ○ An overdraft fee is a charge that a bank may impose when a customer doesn't have enough money in their account to cover a transaction or withdrawal, but the bank allows the transaction anyway. ○ The cost of overdraft fees varies by bank, but they can range from $10 to $40, with an average of around $35 per transaction. ○ These fees can add up quickly and have costly consequences. ● CHECK WRITING A diagram showing how to write a check. Source: Fidelity Investments ● EMERGENCY FUNDS ○ Savings for 3-6 months worth of expenses. ● SAVING FOR RETIREMENT ○ Start saving AS SOON AS YOU GET YOUR FIRST FULL-TIME JOB. ○ The majority of Americans do not have adequate emergency funds or enough savings for retirement. BE SMART WITH YOUR MONEY. ● LIVING PAYCHECK TO PAYCHECK ○ All of your monthly expenses add up to the amount you are paid each month, so you end up with $0 left. ● READING YOUR CHECKING ACCOUNT STATEMENT ○ A bank statement typically includes the following information: ■ Personal information: Your name, address, and account number ■ Account information: Your account type ■ Transaction history: Details of deposits, withdrawals, fees, and interest ■ Opening and closing balances: The amount of money in your account at the beginning and end of the statement period ■ Bank contact information: Your bank's contact details for queries or disputes ○ You can use your bank statement to track expenses, identify accounting errors, and spot potentially fraudulent activity. You should call your bank immediately if you find any discrepancies. A sample checking account statement for a fictional bank.