The Importance of Keeping a Savings Account

Many people choose a checking account as their primary or only banking choice in today's society. However, a savings account is just as beneficial, if not more. Below are some reasons to consider opening and keeping a savings account.

Earn More Money

Building wealth can be easier to do with a savings account because your funds will earn money while in the bank. The interest rates for these accounts are generally higher than checking; however, this will vary amongst financial institutions. 

Regardless of the amount, it is better to earn money that could build your wealth, opposed to spending the funds.

Savings

After paying monthly bills and other necessary expenses, it is common for people to purchase additional items or services, regardless of whether they plan to use these things or not. 

Keeping the money in a savings account could prevent unnecessary purchases. As a result, those funds could be spent on future emergencies like roof repair or other expenses, such as buying a new home, taking a much-needed vacation, or starting a business. 

You would be less likely to spend money in a savings account than money stored safely at home or in a checking account due to the accessibility and the fact that there is no debit card – you typically need to make the withdrawal or transfer the funds online.

Reduce the Risk of Debt

By staving off the temptation to spend the money in your savings account, you could lower the odds of going into debt. You will reduce the odds of making unnecessary purchases. 

You can spend the money on necessities in an emergency instead of borrowing from family and friends or taking out loans. The latter option could lead to high-interest rates and cause you to spend more money during repayment. 

Therefore, it is essential to maintain a savings account for unknown expenses, and to make future purchases, instead of using credit options that lead to debt.

Safety

Keeping money at home is something most people do for various reasons, such as myths and superstition. The negative aspect of storing cash at home includes being a victim of accidents or theft, causing you to lose your money and not replace it. 

However, by keeping the funds in a savings account, you can have peace of mind knowing the money is safely in the bank and possibly earning interest, which could boost your savings amount.

Opening a savings account is an excellent option when it comes to extra funds or saving up for future purchases. Your money is safely stored, and you are less likely to spend the funds unless there is an emergency.

How Teens Can Organize Their Finances for Essential Expenses

Teens who learn to manage their money will reap the benefits of financial stability, goal attainment, and monetary self-control. There are many life skills to teach a youth, but financial responsibility is one of those skills that needs to be taught, not only by academic knowledge, but by example.

Create a Budget

No matter how much money a teen has to spend, a clear understanding of what their expenses are is necessary. A written budget is a great tool to use for itemizing necessary and discretionary expenditures. 

When this information is in written form, there is more awareness of which expenses are truly valid and which are too extravagant for a teen’s budget. The method used to prepare a budget can be computerized, as a basic spreadsheet, or in a more simplistic way, as a handwritten list.

Shop Wisely

If a teen looks hard enough, there are usually lower prices for the products and services that a teenager spends their money on. Brand loyalty can be sabotaging to a limited income so buying less advertised, and less popular items becomes a better way to stay within their budget. 

Comparative shopping may take a little extra time, but a wise consumer, even a less seasoned one, should not want to squander their money. This can be one of their first lessons in developing an eye for quality and fair pricing.

Buy an Automobile

When a teenager purchases a car, this is one of their first steps toward independence, and learning the value of setting financial goals. 

Teaching a teen to save money for a car is a lesson that requires emphasis of patience, perseverance, and accomplishment. A teen’s budget that includes provision for saving, will be the starting point for buying a car. 

Some companies, such as Bay Ridge Nissan, know that setting a monetary goal like this is crucial. When the lesson of spending less, and saving more becomes a habit, a teen will begin to master the skill of reaching important goals in their life.

Document Spending

A budget is not effective if there are no records to show spending transactions. Again, a valuable lesson for teens is to be disciplined enough to keep a money log. This written account of their expenditures will be a wake-up call to them if they are being careless with their funds.

Teenagers will grow up to be fiscally responsible adults if they receive early guidance about saving and spending money. Our society will prosper if our younger citizens accept their financial obligations, and create monetary stability for themselves and their future families.

Teaching Teens Financial Responsibility

Raising a child in today’s tumultuous world can be the biggest challenge of your life. 

It becomes especially apparent in the teen years, when the contrast between what you try to teach your child and the influence of peers and the media seem to be in direct opposition.

There’s one area in which many pop-culture trends go in direct opposition to actual good practices and principles that we want to instill in our children: finances. 

Maybe many of us avoid the topic because we are still trying to become financially literate ourselves. But whatever your current state, financial responsibility is an important lesson to teach your children NOW. 

It might not seem as important or damaging as drug use, but just like illegal substances, it can have a permanent effect on your child’s habits, brain, and happiness. 

While financial happiness may seem like something that’s only important on the surface, it’s important to note that financial woes are among the greatest causes of long-term depression, divorce, and stress that contributes to life-threatening illness. 

So, how can you raise fiscally responsible children in a world that just wants them to charge credit cards right and left? Here are some ideas: 

First of all, make sure that your child understands what a credit card is. 

Many parents give their child a credit card as they hit the teen years or enter college so that they have some emergency money just in case. 

Additionally, as your child hits the age of majority, credit card companies will start to pounce, advertising low interest rates and attractive fringe benefits. It’s important that before they have any access to credit cards, they understand that credit cards are not free money. 

Rather, they’re a very temporary loan that can snowball into crippling debt if not handled properly. Teach your child smart credit card habits, like those found here, and consider starting them on a debit card instead of a credit card until they gain some more experience with money management. 

Encourage them to set a long-term savings goal

This could be one of the most powerful habits that you instill in your child. After all, as you grow and your financial responsibilities become more complicated, there’s always something that you’re saving for (usually several things). 

Teach your teen to prioritize for things that aren’t coming for a long time yet. Let them have practice weighing the benefits of instant gratification against their goal to save enough money for a new car, or an epic summer vacation. 

Help them learn a habit of always setting aside some money for savings.

Let them get a part-time job. 

There’s nothing that teaches us the value of a dollar like having to work for it ourselves. Help your child understand that the cost of a pizza could equate an hour of hard work. 

They’ll start to look at price tags completely differently when they do the math. (“This shirt is three hours of work, that movie ticket is one hour, and this car repair is 10 hours.”) 

Give them a dinner night

One interesting way to teach your child responsibility is by putting them in charge of dinner every now and then. 

Give them a budget and challenge them to do both the shopping and the cooking themselves. Help them realize that, while ordering pizza is an easy solution, it can break the bank after a while. It can also teach them about incidental costs, like tips, transportation, and add-ons. 

This can teach your child about both money and nutrition. It can be a dramatic lesson to see the difference between the cost of eating out and making spaghetti at home. 

Set a fixed budget for a trip. 

Managing our money while we travel is hard for all of us. Unexpected costs can throw our budget off every day, forcing us to re-adjust. 

If your child is taking a trip, whether with your family or with their friends, give them a fixed budget and challenge them to stick to it. If they run out of money with three days left to go, they’ll learn that they need to start prioritizing better. 

This can also save you the stress of having to say no to their various costly requests throughout the trip. Instead, you’re putting the choices in their hands and letting them deal with the consequences in an immediate way. 

Teach them to make a budget

This can be difficult when your teen’s costs are so different from yours, but setting the habit now can help them be more wise when they manage all their own living costs. 

Remind your teen to factor in insurance, gas money, and savings first. This will help them realize how much is really available for their optional costs, like eating out or doing activities with friends.