5 Ways to Improve Your Banking Intelligence
Wondering how savvy you could be with your bank accounts? Learn about ways to increase your savings balance and get smarter about banking strategies. Here are five actions you can start today.
1. Overcome Account Anxiety
When was the last time you checked your bank statements? If it’s been a while, you’re not alone. It can be common for people to avoid looking at their expenses and deposits, says Omari Hall of GreenPath Financial Wellness, a nonprofit based in Farmington Hills, Michigan.
“Looking at your account and seeing the balance may give you a feeling of anxiety,” Hall says. Or, it could be the familiar feeling of disappointment of wanting to buy something but seeing that the funds aren’t there.
But looking at your account also gives you data, which can be beneficial, he says.
“When the data is in front of you, it’s easier to decide what to do with your money,” says Hall. For example, if you notice you’re using expensive food delivery services several times a week, that might prompt you to schedule a few home-cooked meals instead. This is especially true when calculating how much money you will save.
2. Aim to maintain consistency
Part of being a wise saver means putting money aside for a emergency fund. It’s good to have a cash cushion — ideally, enough to cover three to six months of expenses, although that amount is unrealistic for many people, Hall says.
If you’re building your savings, Hall suggests having a consistent goal instead of a particular amount. For example, let’s say you get paid weekly and set up automatic savings deposits of $10 with each paycheck. With this constant saving, you would have over $500 after a year. This could go a long way toward paying for an emergency expense.
3. Make the most of account returns
From your first dollar saved, you’ll want to put your money in a high-yield account. Earning more interest allows your balance to grow faster over time. And rates on savings accounts are currently higher than they have been in years.
Suppose you have $1,000 to deposit in a savings account (for example, you had saved $500 and received an additional $500 in tax refunds).
If you keep the money in a savings account that only pays an annual percentage return of 0.10%, your balance will only earn a dollar in interest after one year. But put that money in a high-yield savings account that pays 4% APY, and your funds would grow by $41 over that period. Without much more effort, that’s $40 more than if you kept your money in the low rate account.
There are also checking accounts that allow you to earn high returns on your balances. You might have to jump through a few hoops — make a certain number of debit card transactions each month, for example — but if you find one that works with the way you do your banking, you could earn higher returns at both on your checks and on your savings.
If you have a bank account that charges you a monthly fee of $5, you’re paying about $60 a year to the bank, which could be more than what you’re earning in interest. Some establishments charge more. Opt for an account that waives these fees with easy-to-complete requirements, or better yet, opt for a free account that charges no maintenance fees. Also look for checking accounts with little or no overdraft fees. Many financial institutions have reduced these penalties or eliminated overdraft fees.
5. Ask about federal insurance
Most of the accounts that offer the best returns are online only. If you’ve never opened an account with an online bank before, you might be wondering if online banking is safe. However, your money is protected if the account is with a bank with federal insurance through the Federal Deposit Insurance Corp. or with a fintech company that partners with a federally insured bank. For credit unions, the money would be secured federally through the National Credit Union Administration.
According to FDIC, “the standard amount of deposit insurance is $250,000 per depositor, per insured bank, for each class of account ownership.” (Examples of ownership categories are joint accounts and single accounts.) And depending on the NCUAthis standard insured amount is the same.
This means that if your the financial institution goes bankrupt, you always have access to your money, up to the insured amount. Before depositing your money with an institution, be sure to check their policies and make sure the funds are federally insured.
Boosting your banking knowledge doesn’t require much effort. These five suggestions can improve your banking knowledge and your bank balances.