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Bank smarter so you can manage your money more effectively
The first decision you make in developing a solid banking strategy is where you bank. You have a few options, each with different benefits and drawbacks.
If you haven’t done it lately (or ever) look around at the financial institutions in your local area. See what’s available that’s closely accessible, then head online to start checking websites and reviews. Find an institution that fits your lifestyle and goals, with the right accounts for your needs.
Most people don’t pay nearly enough attention to their checking account. These days, there are a variety of checking accounts that fit different banking styles. If you have trouble keeping money in your account, then you should have one that doesn’t have a minimum balance requirement; otherwise, you could pay fees.
By the same token, if you don’t struggle to keep cash in your account, find one that waives monthly maintenance fees for maintaining a certain balance. Your goal should always be to bank fee-free. That way, you’re not spending money to keep your money.
If the only account you have is your checking account, that means you’re underbanked. This refers to a condition where you underutilize banking products; as a result, it’s harder to manage your money. It’s basically one account away from being “unbanked.” This is what happens when you have no accounts, whether by choice out of mistrust for banks or because your account was closed due to misuse.
Having the right accounts is the first step in establishing an effective financial plan. Stuffing money under your mattress doesn’t exactly help your money grow. Paying fees to pay bills with money orders through a check cash store doesn’t make sense either.
If you don’t trust your financial institution, the solution is not to avoid them as much as possible. Instead, you should choose a better institution that works for your needs.
Your checking account doesn’t have to just be a place where you deposit and keep your money. Some checking accounts offer small interest rate growth; it’s usually pretty tiny, but at least it’s something. Keep in mind that most growth checking accounts require a pretty hefty minimum balance, so this definitely isn’t a starter account.
Instead, develop your banking plan so you get good at maintaining a sizeable balance. Once you see that you’re not struggling to keep it up, consider switching to a growth account.
Checking and savings accounts both technically count as cash equivalents, but they’re definitely not the most effective. With such low interest rates, it’s impossible for your money to grow quickly. Many basic savings accounts only offer less than 1% growth.
In order for your money to grow effectively, you need to invest it in more effective savings tools. No, this is not us telling you to play the stock market. But without getting over the intimidation and fear of risk that keeps most people from investing, you can use cash equivalents to help your funds grow.
Cash equivalents are any investment that can easily and readily be converted to cash. In includes checking and savings, but also extends to Money Market Accounts (MMAs) and Certificates of Deposit (CDs).
Financial institutions offer these tools, so check with yours to see how you can start saving smarter. Also, be aware that you don’t always need to go to your bank for these. If you see a better rate advertised with a different institution, grab it.
On any kind of financing, from mortgages to auto loans, your bank can be an invaluable resource. Always check rates and see what products your financial institution offers first. Also, see if they offer incentives for customers, such as money off closing costs on a mortgage. In some cases, you may be able to waive fees on your checking account if you have set up Direct Deposit on a loan from the same bank.
When car buying, you also want to check with your bank first. This will help you know how much car you can afford and give you a loan to compare any dealership offers against. And, they can be a good source of credit help, too. You can get credit cards that are only offered to customers and get debt consolidation loans to pay off existing debt efficiently.
The point is, talk to your financial institution first, because they may have a product you need. And again, if you don’t trust your bank to help you, it’s time to find a different financial institution you can actually trust.