Many people feel like if they do not have a fortune there is no need to stress about bank accounts and other interest-earning opportunities. The gig economy produces many paycheck-to-paycheck living situations, meaning that people do not have a lot of money to save or put aside for a rainy day, leading many to favor hiding cash at home rather than in savings accounts. While that fake wall outlet or secret book compartment might be creative and fun to use, it is not the safest place for loose cash.
A bank account is essential for most adults operating in the digital age. It allows for easier transactions and ensures your money is protected and insured no matter how little you have. The remainder of this guide will discuss how to open a bank account and the many benefits of having one.
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What Are the Features and Benefits of Opening a Bank Account?
Before discussing how to open a bank account, it is important to discuss the many benefits and advantages of opening one. There are two primary reasons to open an account: safety and convenience. When you put your money into a bank, the federal government insures it for up to $100,000. Your money is also protected against fire and theft.
Beyond insurance and protection, a bank account offers convenience. It is straightforward to schedule direct payments to your bills and other financial obligations. Also, with a debit or ATM card, you can easily withdraw funds or make payments directly at a store.
While protection and convenience are nice, a bank account also allows your money to grow over time by generating interest, and it helps save you money by offering several free and low-cost services, like check cashing, transferring money, paying bills, etc.
Finally, establishing yourself at a bank can help you access credit. Most banks prefer to work with existing clients, especially those who manage their finances well. If you are looking to buy a car or home or borrow a personal loan in the future, it is an excellent idea to establish yourself at a bank.
Who Should Learn How To Open a Bank Account?
Everyone should learn how to open a bank account. While you might not want to use an account right now, you might need to in the future. A bank account is not something reserved for the wealthy or those with excess funds; it is a financial tool meant to help you organize and track your finances, documenting your cash flows so you don’t have to wonder where your last 20 bucks went.
When Should You Learn How To Open a Bank Account?
Ideally, people will learn how to open a bank account when they are younger, preferably when they start earning money. Having a bank account early in life can help teach fiscal responsibility and life skills necessary in adulthood. While it is preferable that people learn as teenagers, under the supervision of their more experienced parents, there is no reason someone cannot learn later in life. The benefits of having a bank account remain the same regardless of your age.
Examples of Using a Bank Account
Once you learn how to open a bank account, there are several ways you can use it. Here is a list of seven potential uses:
- To hold money and earn interest
- To pay bills
- To use a debit card
- To organize your finances
- To save for a rainy day
- To save for a house
- To build a positive reputation at the bank
Steps for Having a Bank Account
Now that you understand the benefits of a bank account and several potential uses for it, it is time to learn how to open one. Opening a bank account can be broken down into an eight-step process:
- Choose your banking option (bank, credit union, online institution)
- Visit the location or website, and assess the feel
- Pick a checking account, savings account, or both
- Talk to a banker and provide your personal information
- Provide a financial history, if requested
- Agree to the terms of the account
- Sign all essential documents
- Deposit money into your new account
Opening a bank account is an essential step in financial independence, but you should not take it lightly. You want to be acutely aware of any fees or protections required or provided by the bank of your choosing. For example, you want to avoid monthly maintenance fees whenever possible. Check to see if there is a minimum balance requirement. If possible, find an account with overdraft protection, but avoid using it. You might want to talk to a financial professional to get more information.
A bank account is not a necessity, but it is advisable. Typically, people see two options to bank accounts, despite multiple financial vehicles at every bank: a savings and a checking account. Neither option will provide significant earnings in interest, but each is useful for paying bills and saving for specific situations.
The choice of bank is yours. However, online banks tend to offer better returns than physical locations because of lower overhead costs. A physical bank does have the benefit of in-person exchanges, meaning you might get quicker and more satisfying answers to your account questions. Also, many physical locations might provide access to financial advisors.
Learning how to open a bank account is necessary for financial independence, but selecting the right account for your financial goals can feel like a solo venture. For a look at another option check out our review of the Chase Checking Account here