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Checking, Savings, and Retirement Accounts
There are many different types of bank accounts; The two main ones are checking accounts and savings accounts. This information will help your basic understanding of how to get and use each.
What to do: You should seek out checking accounts that are available without many fees or costs, it could save you $15-20 a month or more. Go to a financial institution of your choice with a sum of money and an ID to open a checking account. That money is your initial deposit, (some banks will require a minimum initial deposit that you can find online).
Read everything on your contract and make sure you understand everything about it (minimum balance requirements and fees etc.)
How to use: Checking accounts are used to store money for bills and everyday things, put money there for you to use on things that you will buy regularly (using a debit card, checks, and cash) and you must keep a history of your account transactions either online or on paper.
Instead of writing a check for bills, a checking account can be used to pay bills online if you set up an auto-pay.
Checking accounts need to be balanced each month.
This means monitoring payments even if automatic in order to ensure that you don't spend what you don't have and then end up paying fees because of debt. Additionally, you should monitor payments to ensure that only the intended deduction was taken out.
You will get a statement from the bank and it will list all of your withdrawals and deposits into and out of the account (you are responsible for making sure those are correct; otherwise you may not be aware of identity fraud or other financial loss).
To verify they are correct you should compare the institution's transaction list to your own.
If they are incorrect you contact the institution and have them fix it.
What to do: Go to your preferred financial institution with a sum of money and an ID to establish a savings account. Some require a minimum first deposit (find out online using their website)
Savings accounts will usually pay you a rate of interest on your deposits. This means that over time the amount of money in the account will grow. Go to their website for information on how large the yearly or monthly rate is.
How to use: Savings accounts hold money that you will not use on a regular basis, hence, “saving” money for later.
This money is saved in case of injury or accident that may be too expensive to take out of your regular wages.
This can be an account with the same organization as your checking account or a different one that may give you better interest rates on your money. See the individual institution's websites for more information on their policies.
What it is: A retirement account is something you can start when you get your first job. You will deposit money throughout your employment career from your income and it will grow with compound interest until you reach a minimum set age and are then able to use it. Because of the compound interest used in most retirement accounts, it is EXTREMELY IMPORTANT to start it EARLY, a video explanation on compound interest can be found here. This is in the hopes that you can have a good quality of life when you are no longer able to work or do not wish to work.
What to do: Go to your preferred Bank, savings and loan, Credit Union, stock brokerage firm, or other investment firm and establish with them a retirement investment account.
How to use: Continue depositing money into it throughout your working life and until you reach the age of retirement.
Rules: You cannot access the money(without penalty) until a set age range. It will grow tax-free. Depending on the account you may have to pay taxes on the money taken out later. There is usually a cap on the size of each deposit.
A good resource for more information on different types of retirement plans is the IRS, visit here
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