Getting Your First Bank Account

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Getting a bank account is your first step in establishing a financial relationship which can help you save money and increase your wealth.

Why you should open your own bank account?


Because opening a bank account will help you:

  • Increase your wealth by earning interest
  • Keep your money safe from loss or theft
  • Save more money with a dedicated savings account
  • Build a relationship with the bank so that you can access some of their other products like credit cards, loans and even a mortgage
  • Pay bills like your cell phone, cable or internet
  • Keep track of your money with statements

Which bank should I choose?

If you are in the US, make sure your bank is FDIC insured. In Canada, make sure your bank is CDIC insured. Just ask them: “Are you FDIC insured?” What that means is that if your bank fails or goes bankrupt you don’t lose the money you deposited (up to $100,000!) Pick a bank with a branch that’s close to home, school or work. It makes it easier to visit. Same idea with ATMs, pick a bank with an ATM close to where you live, work or shop. This will save you time and most importantly those high ATM fees you have to pay when you use other banks’ ATM machines.

Types of accounts


Checking

This account is used for your everyday banking like deposits (checks, direct deposits and cash deposits) and withdrawals (writing checks, paying bills and cash withdrawals).

Visit different banks and ask them about their various checking accounts (most banks offer different types of checking accounts). (Some charge a monthly fee like $5, some waive that fee if you have a minimum balance, say $1,000. Most banks should have a student account so be sure to inquire.

Ask them about their other fees like transaction fees, some banks offer 10 free transactions per month and charge $1.00 per extra transaction. Withdrawing cash at the ATM or depositing a check for example would count as a transaction.

Find out what the charge is if you write a check but don’t have enough money in your account to cover it? This is called an overdraft. Also, make sure you can access your account online.

Savings

This account lets you transfer money from your checking account to a savings account which earns more interest. Typically a checking account doesn’t earn you much interest (typically none) but a savings account can earn you 2% or 3% which is much better than no interest!

But the transaction costs for savings accounts are much higher, you only want to use this account to save money not for everyday use like paying bills.

You can open a checking and savings account at the same time if you like.

Item to bring with you when you open an account

Most banks will require some form photo ID like a passport, health card or driver’s permit and your social security number or social insurance number in Canada. But check with your bank first and they tell you what form of identification is acceptable. Some banks have age restrictions for teens wanting to open their own accounts without the help of their parents. For some banks that age is 16, for others it might be 18 and some bank managers will even make an exception if you appear trustworthy. In any event you can always ask a parent to co-sign for you.

The other thing you need to bring is some money! Your initial deposit should be at least $40. See the banks take out their fees automatically from your account, that’s why you want to make sure there’s always enough money in there to cover those fees. If not, you will have to pay a hefty penalty and it will make you look bad when applying for credit later.

One last thing

When you deposit a check like a paycheck in your account, it usually takes 5 business days to go through (or clear as they say) even though you might see it on your statement.

Always make sure you have a good minimum balance (say $100) and that you always leave yourself enough time (say a week) when taking money out so that you never get caught with not enough money in your account.
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