Table Of Content
Financial assets provide security, but as this chart using FED Survey of Consumer Finances shows, the average financial assets increases as consumers age. The under 35s age group has an average of $35,000 in assets. This suggests that the under 35s may still be burdened by lower income jobs and student debt.
There is a significant increase in assets between this group and the 35 to 44 age group. After this point, there is a steady increase in assets until retirement.
Checking Account: Managing Your Finance
When it comes to understanding your bank accounts, the checking account is the simplest one. This is where you carry out normal transactions with your checks, debit cards, online account or just walking into a branch. You get to pay bills, make deposits, make payments and transfer money super easy with these accounts.
Generally, these are the first accounts that you would create and they give you a whole bunch of benefits. Namely, they’re going to help you get things like savings accounts and investment accounts. Also, closing a checking account can be a short and simple process if you do it correctly.
Checking Main Features
Just about anything you want to do with a checking account is going to be easy. Whether you’re transferring funds, depositing funds, taking out money or just spending it, you won’t have problems with these types of accounts.
- ATM – An automatic teller machine is a super-easy way to get to the money in your checking account. As long as you use in-network machines you can get it without fees too, which means it’s also free access from wherever you are.
- Debit Card – This is another free method to access your money and to use it without ever having to touch the cash itself. When you make a payment with a debit card you swipe it like a credit card, but the money comes out instantly like if you’d paid cash or with a check.
- Check – Speaking of checks, they’re not as common for most people, but they’re actually quite simple. You have to write out a check with how much it’s for and who it’s going to and these have to be ordered directly from your bank.
- Bill Pay – Paying your bills online is free through most financial institutions and you can usually set it up so it’s fully automatic too. That means it’s also going to be a lot more convenient for you.
- Online Banking – If you don’t want to walk into a bank branch you can set up online systems that will take care of everything. You can just log on a computer and you’ll have no problem doing anything you want from making payments to depositing checks and even transferring money between accounts.
What are the 4 Types of Checking Accounts?
There are many types of checking accounts. You need to choose the one that best suits your needs.
- Standard checking: This basic checking account typically includes features such as a debit card and direct deposits.
- High Interest Checking: This type of account allows you to earn interest on all balances, unlike other checking accounts.
- Cash back Checking: These accounts allow you to make a small profit on your purchases. You may be eligible for 1% cashback on purchases up to a certain amount each month.
- Additional Checking: These accounts are made for specific customers. There are seniors, students, and business checking accounts.
Once you have identified the type of account that you are looking for, it is possible to start narrowing down your options.
Grow Your Money by a Savings Account
When it comes to a savings account it’s designed to keep your money stored for later. That means you’re going to usually make some interest but you’re probably going to have some limits on what you can pull out and when.
Still, these accounts come with FDIC insurance and those interest rates.
Features & Restrictions
When you open a savings account that means you could actually get penalized for taking the money out. That’s because banks have the right to limit withdrawals on what’s considered a ‘time deposit’ like your savings account.
You generally won’t have to worry about this, but you want to look at the rules. You might be able to make a few transactions, but it’s probably limited to so many a month. You also want to look at different types of fees that are charged, including low balance charges.
There are limits that are imposed by the federal government related to just how many withdraw you can make over the telephone or electronic withdrawal. Usually, this isn’t going to apply to ATM transactions or to in-person requests.
What Are the Differences Between a Checking and Savings Account?
|Checking Account||Savings Account|
|Purpose||Frequent spending, direct deposits||Growing savings, earning interest|
|Interest||Usually don't earn interest||About 2% (as of March 2019)|
|Withdrawal Restrictions||Daily limit||Typically 3-6 withdrawals a month|
|Fees||Monthly maintenance fee + ATM withdrawal||Little to none|
|Protection||Up to $250,000 per account holder by FDIC||Up to $250,000 per account holder by FDIC|
Increase Your Interest – Savings Account
If you get a checking account you’re generally not going to have any interest building up. That means your money is just going to sit there and do absolutely nothing for you. That’s definitely not the way you want to keep your money, right?
With a savings account, you’re not necessarily getting a lot of interest, but at least you’re going to be building up something. Plus, you can look around for the best rates possible and get something a little better at least.
Lower Monthly Fees – Savings Account
Checking accounts are more and more frequently charging fees for monthly use.
That means you’re going to be paying a few dollars or more just to have that account. In some cases, however, there are ways to get this fee waived if you meet certain requirements. You want to watch for what those are and how you can meet them if you do use a checking account.
When it comes to savings accounts you generally don’t get the fees. That’s because banks are getting more interest than they’re passing on to you. So they take that money out of the fees that they would normally charge you. It means you’re going to save money this way.
Higher Withdrawal Limits – Checking Account
The Federal Reserve Board’s Regulation D requires that banks allow only 6 withdrawals from any account that’s considered money market or savings. If you use an ATM or an in-person request you get to make more, but you’ll want to keep track of how you do your withdrawals otherwise.
With a checking account, you’re not going to have a limit to how many times you want to withdraw money. On the other hand, you are going to have limits on how much money you withdraw.
When you use your card you can only charge up to $1,000 a day over all your transactions (though this may vary a bit with your card) or withdraw up to $500 from an ATM every 24 hours.
Minimum Balance Requirements – Savings Account
When it comes to how much money you need to store you’re going to have better benefits with a savings account. That’s because they usually have very low (if any) minimum balance requirements. They want you to keep your money there, after all, because it’s going to earn the bank interest.
When it comes to checking accounts you usually have an amount that you’re required to keep in the account at all times. This minimum could be only $25 or it could be up to $100 or more, depending on the type of checking account.
Safety and Protection – Both
You’ll get FDIC insurance up to $250,000 with either type of account, which means that you’re going to have much better protection than if you just store your money at home.
This protection occurs because the federal government says that financial institutions need to give you some insurance in exchange for giving them your money and your personal information. What’s even better is you don’t have to pay for this insurance at all.
What is the Best Checking Account?
There are many options for checking accounts offered by banks. This can make it difficult to choose the right account. These are three great options:
- Axos Reward checking account at Axos Bank has a minimum $50 balance. It offers all the benefits and essential checking but with a higher APY (Up to 1.25% APY (requires monthly direct deposits of $1,500)). To receive the full rate, however, you must use your Axos Debit Card for at least 10 transactions per month. You will also receive at minimum $1,000 monthly by direct deposit.
- Aspiration's Spend & Save account allows you to manage your cash and save money. You can also use a debit card to make purchases. Customers can make transactions online or via an app. On your entire save account balance, you can earn 3% up to $10K, then 0% interest per year.
- Ally Bank – Ally Bank interest checking account is a single checking account that offers a tiered rate structure. Your minimum daily account balance will determine the yield. Your checking account does not have a monthly maintenance fee.
There are a few simple ways that you can identify the best accounts.
- Choose the right type of account – There are many types of checking accounts. You need to first determine which type is best for you.
- Online or in person? Next, think about whether or not you would prefer to open a checking account online.
- Accessibility – It is also important to consider accessibility. You must use the ATM network of your bank to withdraw money from ATMs. Many banks offer ATM withdrawals at no cost. You should ensure that ATMs and branches are available in your area by checking with your bank.
After narrowing down your options, it is time to look at the fees. Most banks charge a monthly fee that is deducted from your account each month. If you have a minimum account balance, some banks will waive these fees. Online banks don't usually charge any service fees.
Checking & savings Account: Should I Be Concerned About Inflation?
When you consider your long-term finances, inflation is a concern. Inflation is a concern when you consider your long-term finances. If inflation is 2%, and your savings account pays 1.5% over the long-term, you will lose some of the purchasing power of your money.
If you plan to leave your money in an account, you should seriously think about how the interest rate compares with inflation.
A checking account is only for day-to-day transactions and short-term deposits. A majority of checking accounts do not pay interest so it is not a good account for large amounts. A checking account should have enough funds to cover your monthly expenses.
You should consider the benefits of a minimum monthly balance in your checking account to avoid inflation and tying up your money. A minimum balance on a checking account is not only necessary, but it also provides great benefits that more than make up for the lower inflation rate.
Savings Accounts: Online Bank or a Credit Union?
A lot of modern banking procedures are available through an online bank. Everything is done online, which is typically convenient if you don't require cash frequently. The online bank will have a mobile app that will allow you to monitor your account balances from anywhere.
Banks also have more ATMs than credit unions, so you'll be less likely to be charged fees for using them. Online choices also have the advantage of not having to pay to operate physical branches, which allows them to offer better, higher interest rates on their accounts.
Credit unions typically charge lower fees, but they offer fewer online and mobile options. They are also nonprofit organizations, so you will have a variety of options with no hidden fees or costs. They are also known for providing superior customer service.
Finally, credit unions are not all insured. You'll want to ensure that your money is protected when you open a savings account. Check to see if the credit union is insured by the Federal Deposit Insurance Corporation (FDIC).
When it comes down to it, the decision is entirely up to you and your preferences. Both provide excellent services and are ideal for establishing a savings account.
How Much Should I Put Into My Savings Account?
When it comes to saving, there are a few broad guidelines to keep in mind. The amount saved, however, will vary from person to person.
Examining your important monthly bills is the best approach to determine how much to save. Add up your food prices, transportation costs, debt repayments, insurance charges, rent or mortgage payments, and other necessary expenses.
In the event of an emergency, you should have three to six months' worth of funds on hand. You won't get into debt this way, and you'll still be able to buy groceries and other necessities.
So, if your monthly expenses are $3,000, you'll need to save $9,000 for three months. That would be $18,000 if you wanted to save for six months. Of course, you don't have to deposit it all at once in your savings account. You can do this in little steps.