Lesson 4: Savings
What do the newest iPhone, tickets to your favorite concert, and college have in common? All of them require savings.
The key to being able to make large purchases like these is saving money; it’s a good financial habit that consists of putting money away somewhere, but also making sound financial decisions when banking. More specifically, opening a savings account can be a useful tool to earn interest and benefits over time. Saving means putting money aside for future use, banks and other financial institutions offer incentives for people to keep their money in a savings account. These incentives are referred to as earning interest.
In other words, banks pay interest on money put into savings accounts because the bank can use the money to make loans to other customers. So basically, by putting your money away in a savings account in hopes of buying that new iPhone or Carti ticket, you will have more than what you started with. However, it is important to know that the amount of interest earned depends on several factors, including the type of savings account, which bank has the account, and how long the money is kept in the account. There are also many different types of savings accounts that can be opened, so it is crucial that you research to see which is the best fit for you. At the end of the day, planning well and putting your money into a savings account can be an extremely beneficial financial decision.
Now that we’ve talked about how important saving money in your savings account is, let’s talk about how to open a savings account. Now I’m sure you’re thinking, “Saving sounds great and all, but how in the world do I open a savings account at this age?!” Actually, the answer is quite simple. Kids like us can open a savings account at a bank or another financial institution as long as a parent or adult guardian is present. All you have to do is know your Social Security number and have some money to deposit! Finally, your parent or guardian will co-sign the account - which means that they will be sharing responsibility for the account. Boom, it is as easy at that! Now, the road to saving for whatever your heart may desire just got that much easier (and you don’t have to worry about someone stealing your piggy bank)!
We have talked about saving money and even how to open a savings account, now let’s jump into using an actual account. There are procedures called deposits- to put money in, and withdrawals- to take money out of a savings account. Although quite simple, these procedures are important and need to be done with caution. To make a deposit, or put money into the account, you need to fill out a deposit slip. Once you fill out this slip, all you have to do is hand it to the bank teller and the rest is all handled. The procedure for withdrawals, or taking money out, is very similar to that of a deposit. All you have to do is fill out a withdrawal slip, sign the slip while at the bank, and show your ID. After that, the money towards your new gadget is all yours and ready to go!
Example of Deposit and Withdrawal Slips
Savings deposits can also be made by using an automated teller machine, or ATM. You can even check with your bank to find out the age requirement for using an ATM. ATMs are a convenient and simple tool to use and are found in banks and many other convenient locations all over the place. When a bank gives you an ATM card, they also give you a personal identification number or PIN. This PIN is like your personal secret code that only you should know! If someone else knows it, they may be able to take money out of your account…don’t share your PIN with anyone!
Lastly, we’ll talk about how to keep track of your savings account! While saving up to eventually get that new iPhone you’ve been wanting, it is important to have a record of all your withdrawals and deposits along the way. All banks keep track of their customers’ savings accounts, however, it’s your responsibility to keep track of all transactions. It’s essential to make careful calculations and make sure each deposit or withdrawal is correctly recorded. When you open a savings account, the bank provides you with a savings account register to track your deposits and withdrawals.
In all, savings represent a net surplus of funds for an individual or household after all expenses and obligations have been paid. Savings are kept in the form of cash or cash equivalents (e.g. as bank deposits), which are exposed to no risk of loss but also come with minimal returns. Savings can be grown through investing, a higher risk, higher reward process.
Topics of Additional Interest:
Sources:
*All rights of content are reserved to the Wells Fargo Hands on Banking Curriculum*