Are you starting your first job? Going to college soon? Or just wanting more financial independence? If so, it sounds like it’s time to open your own bank account. Here’s what you need to know to get started.
Checking vs. Savings
You may have heard of checking and savings accounts, but what makes them different?
A checking account is often used for everyday transactions, like buying groceries, putting gas in the car, and so on. Checking accounts come with a debit card and checks. A debit card takes money directly from your checking account when you pay for something or when you withdraw money from an ATM. A check is a physical piece of paper that allows money to be withdrawn from your checking account.
A savings account is an account you utilize for saving larger amounts of money, like an emergency or vacation fund. Typically, you do not use the funds in a savings account for everyday purchases, like you do with a checking account. This is because savings accounts usually have a higher interest rate – so keeping money in this type of account overtime actually earns you more money back.
How interest rates works: Let’s say that you have $100 in your savings one month and your interest rate is 1% (that means 1% of $100 is $1).For that month the bank/credit union will add an extra free $1 to your account. If the same 1% interest rate applies but you have $1,000 in your account, then you receive $10 in interest that month. This means that the more money you have in your account, the more free money you can receive.
Finding a Bank or Credit Union That Fits Your Life
Before you open an account, research the differences in banks and credit unions near you. For example, there may be a regional credit union that has several branches in your area or there may be a bank with branches across the country. If you go to school in a different state, it might be worth opening an account that you can access in person at home and at school. If you plan to only receive money through checks or electronic deposits, you can also look into online banks.
Know What Types of Accounts Exist
Another part of what may help you decide where you open an account is knowing the various types of accounts different banks and credit unions offer.
For example, some institutions offer a student checking account, which usually waives monthly maintenance fees for high school and college students. Things to consider: some accounts have a monthly fee if your balance is below a certain amount. Another thing to think about is that many institutions also have interest rates for checking accounts, so you may be able to receive a small amount of additional money through this type of account, as well as through a savings account.
Opening an Account if You Are 17 or Younger
If you are 17 or younger, you will need an adult to open the account for you. This is known as a custodial account, and while it is owned by “the minor” (ie YOU), it is managed by the adult until you turn 18. This means that both you and the adult can take money out of the account, therefore you should ask a responsible and trustworthy adult to open this type of account.
Applying for an Account
When you have decided where to bank and what type of account (or accounts) to open, you will need to apply. You can typically apply online or in person.
During the application process you will need to provide your legal name, your contact information, your social security number, and oftentimes a proof of address (for example, a piece of mail that has your name on it or a copy of your license or state ID or Tribal ID with your current address). Some institutions require a small initial deposit to open the new account.
To be certain of what information you will need to provide, contact the bank or credit union you want to open an account with.
Additional Resources:
- Banks vs Credit-Unions
- Types of Checking Acounts
- Podcast – How to Spend Less Money, Starting with a Budget
Author: Originally from Oklahoma, Summer Lewis is a Muscogee and Seminole woman working in Tribal public health in Northern California. She is preparing to start her first semester of her Master’s program at the University of California-Berkeley’s School of Public Health and enjoys baking, beading, and being outdoors.
