Savings accounts are a
good way to save money. Unlike a
checking account, savings accounts are meant to be used to save
money, not spend it. You can save for something special or for that
‘rainy day’ that our parents always say is coming. By rainy days, it
means emergencies or things you need when something unexpected happens.
For example: Let’s imagine that John doesn’t have a savings account.
He finds out that his favorite rock group is having a concert in his
town. He needs ticket money but all the money he has is in his checking
account or in his pocket. These don’t add up to a concert ticket. If
he had saved his money, he would have had the money he needed for the
Some people think it is much easier to save their money in a piggy
bank or in a box under their beds. This is not as good as a savings
account because it is too easy to spend. Having $10.00 in a box under
your bed when your friend says, “Let’s go get ice cream,” is probably
not the best savings plan. It is too easy to get ice cream and promise
yourself that you will replace the money. Somehow it never gets
Most of the time, a savings account is your first bank account.
You need to choose the right bank for you.
Click here for tips on finding a bank.
choose your bank, take your parent to the bank with you because,
depending on your age, he/she might have to sign up for the
account with you. Find out what your
Social Security number is from
your parents because this is a number that is used to set up bank
accounts. When you get to the bank, there are usually people standing
at high desks with little window areas. They are called tellers and
withdrawals to and from your
accounts. People who start accounts usually sit at desks
with customer chairs in front of them.
Account managers have started plenty of savings accounts and will help
you through the steps to becoming a GREAT SAVER!
You sign up for the account and then give the
bank employee the money you want to
deposit. You might be given a passbook which is really a
register of every deposit or withdrawal that happens in your account.
You would need to bring it to the bank each time you wanted to take
money out or put money in. Many savings accounts can be seen online and
don’t have a passbook. These would get a monthly
statement showing all of the
deposits and withdrawals.
Looking at the
image to the
left, notice that
there are columns for money that is added into the account or subtracted
from it. The first deposit is a paycheck. This gives you a
balance of $25.00. After that
the bank will list anything that adds or subtracts money to or from your
account. The picture on the left shows that this person withdrew
$20.00 from the account and earned 69 cents
interest. You get more
interest as your
Interest is money that the bank pays to you so that you keep your
money in the account and allow them to use it while it is there. They
use the money that has been deposited in their bank to lend to people
who want to buy a home, pay off bills, or things like that. There are
two different kinds of interest. The first is simple interest when you
earn a percentage on money you have in the account for a year. This
means that if you put $100.00 into an account that earns 5% yearly, you
will have $105.00 by the end of the year. There are also compound
interest accounts. This means that if you have $100.00 in an account
for a year, you will earn interest on that PLUS interest on the monthly
interest they pay you, too. Obviously, compound interest will add more
to your savings total.
It is very important to keep your bank receipt for money that is
put in or taken out of the account so that you can make sure that your
balance matches the bank’s balance. You need to ‘balance’ your savings
passbook every month so that you can find mistakes early enough to fix
them. Banks have a time limit for fixing mistakes
in your account.
To balance your savings account each month, you need to
know what your beginning balance was for the month, add all of your
deposits and subtract your withdrawals to get the amount that should be
in your account. If you just set up the account, you take all of your
receipts for deposits and add them. Then you take any withdrawal
receipts and subtract them from the deposits. This would be how much
money you have, without interest being added. Then you take the
passbook, if you have one, and compare your total with their total. If
you have a statement savings account, you compare the totals, too. Once
you add the monthly interest, your total should exactly match the bank
total. If it doesn’t, then you need to go back over your deposit and
withdrawal receipts and compare them to the bank balance. Did you
deposit money after the date on the bank statement? If you did, then
that deposit won’t show up until next month. If the difference seems to
be a bank error, you only have a couple of months to get it fixed.
Other savings accounts are: Certificates of Deposit (CDs)
and Money Market accounts usually used when you have lots of money and
want to get more interest, and Individual Retirement Accounts (IRAs)
which are retirement accounts where the money stays until you are 59
and/or quit working forever.
Many people save money last. They pay all of their
bills and expenses for the month and then check to see if there is any
money left. If there is, they might save it. The problem with this is
that most people either don’t have any money left to save or the money
never actually gets into the savings account. While we are young, we
need to start managing our money with good saving habits. Even if you
have only a little money, start a savings account. Add a little each
time you get your allowance or get paid for some job you do around the
house. Figure out what 10% of the money you make is and then put it in
the bank. Having it in the bank lets you see it grow and makes it
harder to spend. We saw online that people today are saving less money
and that they have a harder time when the
economy gets worse. You can
make your future more secure by saving NOW!
More Piggy Pages
You will find out what
a Certificate of Deposit is and how it can help you save
This page gives ideas
and tips for spending your money.
What are they?
Are they right for you?
Why you should give money and
a plan for doing it