Keeping Your Money in the Right Places
Where should your money go?
In the past, people kept their money with them. Kids would have piggy banks filled with coins. And adults even kept their money stored in the house, like in a chest or a mattress.
But those methods of keeping money are becoming less common. Now, people usually keep their money in accounts.
Types of accounts
- Deposit accounts are also known as bank accounts, checking accounts, digital wallets, or spending accounts.
- This is a basic account that allows you to accept deposits.
- You have easy access to your money, through things like debit cards.
- Savings accounts also store your money.
- However, the account has an interest rate that means your money grows over time.
- Investments accounts are accounts where money is kept and invested so it can grow faster than it can in a savings account.
- Retirement accounts and college savings funds are examples of investment accounts.
Which accounts do you need?
Most people have more than just one of these accounts. You want to have different accounts for different purposes. So, you might:
- Have a deposit account for everyday spending.
- Get a savings account to save up money for emergencies and specific financial goals.
- Set up a retirement account when you start working so you can save for retirement.
In fact, you may decide to have more than one of each type of account!
For example, when you become an adult, you might have a deposit account at a bank for your paychecks, a PayPal account for making online purchases, a savings account for your emergency savings fund, and a different savings account for a specific financial goal.
Smart Money Tip: Pay attention to account fees!
Some accounts actually cost money to have the account open. You pay fees on the account at set times. Other accounts have fees that apply in certain situations.
For example, some deposit accounts may have a minimum balance fee. That means that if the balance (the amount of money you have in the account) drops below a certain amount, you pay a fee.
Always check what fees an account has before you open it. You want to do your best to get accounts that help you avoid fees. Otherwise, you must pay money to keep your money in that account.
Account transfers
When you have more than one account, you can transfer money between them. For example, you can transfer money from a deposit account to a savings account. That way, you don’t spend it.
In most cases, you can freely transfer money between the accounts you have. So, for instance, PayPal lets you transfer money to and from another deposit account, such as a bank account.
Again, pay attention to fees. Some account transfers come with fees. You want to avoid these fees, if possible.