How you save your money and where you put it plays a huge role in maintaining your financial security. The obvious place that offers the highest level of protection is a bank. One of the best things about this institution is that it allows you to pay your bills orderly and save for specific goals.
There are different bank accounts and opening one or multiple that suit your needs is quite easy. Let’s look at the two most common accounts and what mistakes you should avoid:
A checking account is an everyday account in which you keep your money to cover daily expenses. Your paycheck is deposited into the account, and you can withdraw when you please to pay utility bills, mortgage, or personal items.
Cash from a checking account can be accessed through a check or an ATM. A checking account does not earn interest, so you should consider opening a savings account.
Checking Account Mistakes to Avoid
Failing to Check Your Balance
You can keep an eye on your current balance by logging into your account online. This prevents you from overdrawing and getting charged with a penalty.
Not Getting Overdraft Protection
For a small fee, you can link your savings and checking account. Linking the accounts will help you avoid the overdraft penalty. This link will transfer funds immediately from your savings account when your checking account runs out of money.
Forgetting Delayed Debit Card Transactions
When you make a transaction from your checking account, it often takes time for the charge to appear in the ledger. Again, noting your delayed expenditures can help you avoid the overdraft fee.
Let’s say you must pay rent on Monday, but your paycheck doesn’t arrive until Wednesday. You post-date the check, but your landlord decides to cash the check on Tuesday. Despite the day being mentioned as Wednesday, the bank will still charge you an overdraft fee.
A savings account is the safety net you need for the future. As the name says, this account helps you save money and make sound investments. Most savings accounts increase your money by a small percentage and offer investment options to double your amount.
A savings and checking account make a great team. Together, they allow you to check your expenses and savings.
Savings Account Mistakes to Avoid
Not Transferring Enough of Your Paycheck
Depositing $50 in your savings account won’t allow you to benefit from its incremental interest rate. You must transfer at least 25% of your paycheck to your savings account. If you plan to buy a house in the future or retire early, you need to increase the amount.
Choosing the Wrong Investment Option
Did you know there are age-based investment options? In this model, you can choose an investment plan that grows old with you. Rather than thinking aggressively about building your funds, assess your options and consider the ones that are steady and will offer more in the long run.
Paying Maintenance Fee
Every bank has a policy for savings account holders. To avoid maintenance fee, they need to ensure their savings don’t fall below a certain amount. So, make sure you withdraw only when necessary.
Setting Up Your Bank Accounts
You can open a checking account with the bare minimum. Visit your local bank, fill up the form, make the initial deposit, and voilà!
As for a savings account, the same steps need to be followed. The only difference is that you will have to make a larger initial deposit.
It usually takes one to two business days for the account to be fully functional. You can transfer funds and talk to a bank advisor about investment options. There you have it ― a short guide to opening a checking and savings account and mistakes you should avoid after.