Nowadays, the banking world has changed so much due to the extensive use of technology and the effects of innovation. For instance, electronic banking has become a necessity and makes our life so much easier. As an athlete, you should develop an understanding of how the banking system works and you should be aware of the advantages and disadvantages connected with it.
It is important to make informed decisions about where and why you should bank. Opening and maintaining the right bank accounts is a vital aspect of good money management. The accounts you open at a bank are the center of your financial planning. Everyone needs checking and savings accounts. All your funds will be transferred from these accounts to pay your bills and to fund your investments.
Therefore, let’s look into some basic information about banking, so that you become the Money Smart Athlete you dream of, and be able to handle any banking situation that may arise.
BASIC #1. WHY YOU SHOULD HAVE YOUR MONEY IN A BANK:
- Safety: Storing your money in a bank is much safer than holding cash.
- Earning Capacity: The bank pays you interest every month just for depositing your money, consequently, your money creates more money!
- Convenience: You can have your paycheck electronically deposited into your checking account, and you can make electronic payments for pretty much everything without having to physically go to the bank.
- Organization: Bank accounts help you track spending, manage savings, and stay on target with your budget.
- Alignment of Incentives: It is in the best interest of both of you and your bank to be financially successful. If your personal finances are doing well, then you will save more (more money for them), spend more (greater line of credit) and utilize more of the bank’s services.
BASIC #2. HOW BANKS WORK:
As a business model, the banking concept is pretty simple. In brief, banks use your money to make loans to other account holders.
- SAVERS deposit their money and earn interest.
- BORROWERS borrow money and pay a higher interest rate to the bank, so the bank makes money.
Banks make money by lending money to people at higher rates than they pay the people who deposit money. For example, you deposit your money in a savings account and earn 2.25% interest and the bank then lends your money to other customers at an interest rate of 6%. The bank makes a profit from the difference between the saving and lending rates.
BASIC #3. WHAT TO LOOK FOR WHEN OPENING AN ACCOUNT:
In order to decide which bank is right for you and your money, you first need to consider your expectations and purpose for opening an account. Is it for business, for pleasure, for savings, salary-depositing, eventual loans, or something else?
You should choose a bank that offers online banking, because in today’s economy it is a must-have feature. With online banking, you can do transactions and check balances from wherever you are!
You should also look at banking costs. Banks have to be competitive, so it pays to compare fees for opening and running an account. There are often fees for both checking and savings accounts. The bank also may charge separate fees for such things as receiving statements in the mail, online banking and multiple checkbooks. Make sure to ask and compare all potential fees before settling on a particular bank.
It is also important to use a bank whose location is convenient depending on where you work or live and it is equally important, to check out the convenience of ATM locations.
Remember that you want to build a long-term relationship with the bank you choose. You’ll find that the longer you remain a good customer, the more benefits you’ll receive. Then, the next time you need a car loan, investment account, business loan, or home loan, you may get better terms because of that positive relationship.
In summary, opening and automating your accounts is the first step toward building a foundation for financial prosperity. Find a bank with which you can grow over time. Look for one that offers the services you currently need, as well as those you may need in the future. Be a good customer and grow with your bank. As that relationship grows, so will the benefits you receive.
BASIC #4. CHECKING AND SAVINGS ACCOUNTS:
You have chosen the bank that best suits your needs, and you are wondering what type of account you should open. In order to get your finances in professional order, you should proceed with opening both a checking and a savings account.
- A checking account is where most of your transactions will take place. A checking account is your banking hub and will handle most of your financial ins and outs. Usually checking accounts do not pay any interest.
- A savings account pays interest on the money you have on deposit. You may use savings accounts for your emergency fund, your short-term fun fund and your long-term investment fund.
BASIC #5. AUTOMATE YOUR FINANCES:
Once you have chosen the bank that best suits your needs, immediately open both a checking and a savings account. This is the first step to getting your finances in professional order. Savings and checking accounts can be linked so you can easily transfer money between accounts. Ideally, you should set up your accounts to automatically transfer a fixed portion of your money each month from checking to savings. That way, saving money becomes easy and automatic. Plus, all your accounts can be monitored smoothly. It’s important to have a good understanding of your account balances, so you know how much money you have available to spend at any time.
It is obvious from all of the above that understanding banking is an important part of financial literacy. As a Money Smart Athlete, you should develop an understanding about how banks work, so that you can manage your banking to your best interest. Properly managed bank accounts can reduce expenses and protect your information.
Always make sure that you are well informed about banking essentials before making important banking decisions, and make sure that you get reliable banking support. If you need any help in the subject of banking you can get in touch with us at [email protected].