Opening Your First Bank Account: What You Need To Know
Day-to-day, managing your money is a lot easier if you’re able to keep track of spending and have a place to store your hard-earned cash. If you’re looking into getting an account at a bank, there are a few things you need to know. Read on for our guide to selecting a bank and getting your first account, and you’ll be prepared to confidently compare offers and find the right one for you in no time.
Bank Accounts & Retirement (What’s An IRA, Anyway?)
If you’re getting your first account, you may be wondering what type of bank account is best for you. The first thing you should determine is how you want to use your account. From there, you can examine which features are offered, and select those most important to your specific needs. Here are some common financial products to get familiarized with:
Checking accounts: These are the accounts that used to be (and technically still are) associated with writing checks. These days, you’re more likely to use them with a debit card. Designed to be drawn from frequently, checking accounts don’t usually pay interest. At most banks and credit unions, getting a basic checking account is free or has very low fees.
Savings accounts: With savings, you’ll have the opportunity to set aside money for emergencies, saving for retirement, a major purchase, or anything else you might want to spend on. Savings accounts typically pay interest; that is, the bank will pay out a percentage to you regularly based on your balance. Savings accounts are designed for infrequent withdrawals and may have special rules about how often you can pull-out cash.
Interest: When you apply for a loan, you want a low-interest rate. But with your bank account, you want the highest rate possible because that’s money the bank is paying you! Over time, interest helps to build your savings. By selecting a savings account with a higher interest rate, you can generate a greater amount of passive income.
Certificate of deposit (CD): If you want to set aside money for savings and don’t plan to touch it for a few years, certificates can pay you more interest. Be aware, however, that you will be subject to fees if you need to withdraw your funds before the agreed-upon termination date of the CD.
IRA, 401(k), etc.: These “alphabet soup”-style terms refer to types of retirement accounts. They often have special rules and implications for your taxes, so if you have questions about these and want to start saving for retirement, it’s a good idea to set up an appointment and go over it with your bank. Here’s the essential piece–IRA accounts can be set up at your bank and aren’t connected to an employer, while 401(k) accounts often are.
Opening Your First Account
If you haven’t already, it’s time to shop for a bank. You may have several options available locally. Here are some things to think about:
Fees: Ask about any fees associated with creating an account and using it. Let them know how you expect to use your account and find out if they offer features like free checking.
Tech & Accessibility: Do they have a mobile app? Are their online banking and mobile features easy to use? Can you deposit checks via your smartphone? It’s 2019!
Branches and ATMs: Is there a branch near you? Do they offer ATM access? How much does it cost to withdraw? Try and think through some different scenarios that you may encounter and see if you’d be covered.
Personal Finance Tools: Do they have financial planning resources? How about retirement calculators? Find out what tools are included with your account that you can make use of.
In-Branch Resources: If you want to talk to someone in-person about a mortgage, financial planning, or anything else, do they have advisors available?
After you’ve determined your needs, you are ready to begin comparing your options! Before going in to open an account, be sure to ask about what’s needed to start: photo ID, SSN, and other personal or credit information may be necessary to have on-hand. No matter what type, opening a bank account is a great first step towards developing healthy personal finance habits. You’re on your way!