The Basics of Banks, Part Two

So now that you believe in banks, it’s time to open up some bank accounts.

There are two main types of bank accounts that you should be interested in: checking and savings.

Checking accounts:

• You can easily write checks from this account (get it?)
• This is the account you access with a debit card
• You can get at (most) of the money in this account almost immediately
• This account will give you a lower interest rate than a savings account (if you sign up for a checking account with interest)
• This account should be used for money you will need within the next six weeks (rent, beer money…)

Savings accounts:

• This account is for money that you will need within a year, but you won’t need tomorrow. It takes a little time to move money in and out of your savings.
• You will earn more interest in your savings account. Try to find a bank that charges no fees and has the highest interest rate. I use Capital One 360 and I make .75% interest. Not bad.
• Savings accounts can be extra useful if you have student loans that are disbursed all at once but you need to make them last for a whole semester. You can set up an automatic transfer so that the amount you need for the month will move over to your checking account, where you will have access. It’s like getting a regular paycheck…but you are earning a little interest (better than nothing) and you are helping yourself manage money so that you won’t be drinking Natty Lite at the end of the semester.

I actually have two savings accounts: one for my actual mid-term savings, and one for my savings goal. I want Lasik and have wanted Lasik for years…but somehow the cash for it never miraculously appeared in my bank account. To make it happen, I opened another savings account and I put $40 a month into it automatically, so I don’t even miss the money from my checking account. I should be able to afford Lasik by 2019 at this rate….I have wanted it since 2006, so let’s just be patient and not worry about it!