Lesson 5: Checking Accounts
Now that you have learned about savings accounts and how to properly save towards your large purchases, let’s talk about another type of bank account. These are called checking accounts. Like savings accounts, checking accounts are used in order to keep track of an individual’s finances. Both checking and savings accounts are ways to keep your money safe, but each account has a different function. Checking accounts are designed for frequent transactions which can occur multiple times in one day! Unlike savings accounts, banks expect people to make frequent withdrawals and deposits to checking accounts. These can be from a few times a day to a few times a week, depending on the person. So rather than using a checking account for that expensive new electronic you want, it would rather be used for that new sweatshirt or bright pink top you’ve been wanting!
So you might be thinking, “Why would I open a checking account?” Well, Checking accounts are an essential piece for money management that can provide safety and accessibility. A major difference between checking and savings accounts is that checking accounts come with actual checks! Woah mind blown! Checks are legal documents that function just like cash and can be used to pay for things like groceries, clothes, and other services.
How to fill out a check
Checks work to help people pay bills or make everyday purchases without having to carry around loose bills and coins which are easy to lose. It is crucial for you to understand that to write a check, there must be sufficient funds in the checking account to cover the amount. For example, you can’t write a check to buy groceries worth $100 if you only have $50 in your checking account. If you were to try and do this, the check would be bounced, or returned to the person who tried to deposit it due to the lack of funds in the account. Not only is this plain awkward but having a check bounced will result in a fee charged by the bank. It is important that whenever you make a deposit or write a check, you also record the details of each transaction in your check register. A check register, much like a savings register, is a document to keep track of each transaction you make to maintain accuracy and the correct balance at all times. This helps to ensure you always have sufficient funds when making purchases.
The most notable difference between savings and checking accounts is that savings accounts earn interest while checking accounts do not. This is why checking accounts are used for frequent transactions whereas savings accounts are often untouched in order to earn interest over time. Utilizing a checking account can help you maintain your finances without having to carry around loose change and miscellaneous bills to make a normal purchase.
Now that you know all about checking accounts and how they are used and differ from savings accounts, let’s talk about how to open one yourself! The process for opening a checking account is similar to that of opening a savings account. You will need a parent or guardian to accompany you and likely the same personal identification required to open a savings account. You should bring some form of government-issued ID, social security number, and some money to deposit! Make sure to check with your bank to be extra careful, as some may have different policies.
Just like savings accounts, you can utilize an Automated Teller Machine (ATM) to make deposits, withdrawals, and money maintenance easier. Like savings accounts, the bank will issue you an ATM card which allows you to access ATMs anywhere at any time! Along with this card, you will be given a secret Personal Identification Number (PIN). Make sure to keep this PIN to yourself because it is the key to all your hard-earned money!
Since you now know what a checking account is and how it can be useful, buying that new sweater or pink top you want just got a little bit easier! You no longer have to worry about losing track of your money and carrying around loose change. Next time you want to be more efficient with your daily purchases, make sure to utilize the benefits of a checking account!
“Checking accounts are designed for frequent transactions which can occur multiple times in one day.”