Banks and Bank Accounts
by Moses Ayiku, Jr. MBA OP/ED
Last week, we discussed budgets and emergency funds. To recap, please set aside time every single month to draw up your monthly budget. Depending on how often you get paid, you can adjust the time. For example, if you get paid every two weeks, you can draw up your budget every two weeks. In addition, ensure that the following are in place:
A saving rate target for your net income. For example, a saving rate of 20% on all net income could be your regular target. The more you save the more you have options for future expenditures. You are in the driving seat!
An Emergency Fund target: An emergency fund could be the amount that can cover your expenses for 3-6 months should something happen, and you are no longer receiving any income.
There are a variety of banks out there. If you do not have a bank account, then it is time to take care of that. When you need a bank account, please do not go to just any bank! Take your time and ask around, find out what type of savings rates the banks offer, any benefits or promotions for opening an account and also the availability of ATM’s and branches to enable you conduct your banking with ease. You may want to ask people you know which banks they use and why. The next step is to visit some of the banks that you have been told about. Research online if you can, to get more information about these banks. Then arrange to visit these banks personally or have a zoom meeting with banker’s to get more information. I suggest that you contact at least three different banks. It is shocking that we at times miss opportunities because we do not do this type of research. Please know that no matter how big or small your income, every bank wants you as a customer once you will be earning money that passes through that account. Banks know that most earners save, and that is attractive to them. You are able to select the bank with the best menu of options that you can take advantage of. For example, some banks offer promotions where they place $100 into your savings account when you open up a checking account with them. Other banks offer special interest rates if you are saving above a certain amount every month. All these should form the basis for you selecting a bank to open your account with. Even if you have a bank account, this type of survey could help you identify a bank that would provide you with perks and benefits that you could gain from. While each bank has its own requirements for opening up accounts with them, most banks will require at least a form of State ID. Make sure that you have one before you visit then bank.
When you visit the bank ask them directly, I need to open an account. Can you please tell me why I should open my account with your bank in particular? Are there benefits that I would obtain from your bank that other banks do not offer? How much money do I need to open a checking account? How about a savings account? What interest rate do you give on savings accounts? Do you have minimum balance requirements for checking and savings accounts? If so, what are those balance requirements?
In opening an account at a bank, the two types of accounts that you should look at opening are a checking account and a savings account. The checking account can be used to receive your salary. This will open the door for you to conduct a lot of your financial transactions online. That will save you time and allow for the benefits of utilizing the banks’ apps to track your income and expenses.
The savings account could be where you could direct your savings from your income every pay period. With time, you may want to investigate whether the bank would allow you to create sub savings accounts. In other words, you could have different savings accounts with the same bank. The advantage is that you could put your basic savings in one account while putting your emergency funds in another savings account. That way you can separate the different monies meant for different purposes. It gives you clarity and easily allows you to assess the savings levels you have achieved. You can also adjust your savings rates based on the goals you are trying to accomplish.
When one is looking at banks, consider credit unions. Credit unions are often set up to provide benefits to the bank members. The bank members are the customers that choose to open an account with them. Most financial institutions are registered with the FDIC. The advantage of choosing a bank that is registered with the FDIC is that funds up to xxx are insured. This is a level of protection that you should always have. Credit unions provide benefits to their customers by way of lower interest rates when they want to borrow money amongst other benefits. The advantage of lower interest rates can be enjoyed when you need to purchase a car for example. While most car dealerships offer financing, please note that their rates are usually much higher than that of credit unions. You could save a sizeable amount of money by obtaining your own financing from a credit union for example, before going to the car dealership to purchase a vehicle. When the dealership offers you financing, compare the rate with that offered by your credit union. Your next step is to go with the lower rate!
If you are unable to open a bank account because of any variety of factors, consider obtaining prepaid cards. Prepaid cards allow you to make purchases online, pay bills and provide other benefits at times. Just as with shopping for a bank, you need to shop for a prepaid cards. There are many of them out there and each has different terms as well as fee structures. Prepare your questions and get information on at least three different prepaid cards before selecting one to use. However, at the end of the day, you should strive to open a bank account. A bank account is definitely more favorable to you as opposed to prepaid cards.
Please remember, when you are choosing a bank and opening up accounts, some will give you free gifts such as pens and bags. Do not let these be the reasons for selecting a bank! Make sure that they are providing you benefits that you can utilize. Ask the questions raised earlier and keep track of the responses so that you can easily identify which bank is giving you a better offer.
Ask about their apps and how easy they are to use. Ideally, you want a bank that will guide you in even downloading the app onto your phone and computer as well as show you the key features of the app. Do not be afraid to ask questions! It is your money and you have the right to choose the best options available out there. If you are technologically challenged, make appointment with a personal banker to take their time and show you exactly how to use their apps.
Prepare your list of questions before you meet with the banker. That way you do not forget any pertinent questions that you may have. By opening your account and obtaining an app that keeps you in touch with your finances, you are another step away from being broke and closer to financial peace!
Please feel free to share with me your questions and experiences on saving. I will do my best to respond and, in some cases, I will write on some of these questions.
Your questions and comments can be sent to localtalknews@gmail.com
