A Bank Account Is Your First Step to Financial Freedom

Personal-finance columnist Zina Kumok offers tips on opening your first bank savings account -- and why it can make a valuable difference as you learn to manage your money.Read More

by Diana Drake

Zina Kumok, 26, has learned a thing or two about personal finance – the hard way. When she graduated from Indiana University with a journalism degree, she was saddled with $28,000 worth of student-loan debt that she had to pay off on her own, and on the starting salary of a journalist, which was only about $28,000 a year. After college, Kumok launched an online blog, “Debt Free After Three,” in which she regularly posts personal-finance reflections and anecdotes about her journey to pay off her sizable student-loan debt in only three years (which she successfully did, by the way). She now writes regularly about personal finance for Knowledge@Wharton High School. Here, she takes us to the bank.

Whether you’re working as a babysitter for your neighbors or stocking clothes at the mall, finding a place to put your paycheck is important.

I remember opening my first savings account. I’d received a lot of birthday money, and I was so happy to see how much I had stashed away. My parents took me to their bank, only a few blocks from our house. I was so proud to get my deposit book and feel like I was contributing to my future.

I rarely made withdrawals from my account, but I made deposits a few times a year. It was always so gratifying and rewarding to see how much my fund had grown. The less attention I paid to it, the more it seemed to increase. Seeing my little nest egg grow inspired me to keep on saving — and in a more organized way than stashing money under my socks in the top drawer of my dresser.

If you’ve been stashing your cash in a piggybank, it’s time to upgrade. Getting a bank savings account is one of the first ways you can take control of your money, and a great early step on the road to financial independence. Before you open an account at your nearest bank, read my tips below to help you make informed decisions.

Interest Rates Matter

If your goal is to have your money earn interest while it sits in your account (and quite honestly, that should be your goal), research what kinds of interest rates various banks offer. When you put your money in a bank, you’re giving that institution permission to use it. In exchange, the bank pays you interest on your money. Credit unions often have better rates and lower fees, so don’t forget to explore those, as well. Credit unions are similar to traditional banks, but have a few key differences. Most importantly, since credit unions operate as nonprofits, they can offer higher interest rates on savings accounts and CDs, and lower interest rates on loan products and credit cards. Need help understanding interest rates? Check out one of my previous KWHS columns.

One interest rate at 1.5% and another at 2.5% might seem similar, but it’s always important to get the highest rate possible when you are earning interest, not paying. With a small balance you might not see a big difference, but the favorable results of a higher interest rate will increase as your bank balance does.

Fees Add Up Quickly

Many banks now charge monthly maintenance fees on their accounts if you don’t have regular direct deposits or maintain a certain minimum balance. If you register for a teen or youth account, however, you can often avoid those fees.

When you open your account, you’ll be asked if you want to pay for any overdrafts. That means if your account only has a balance of $50 and you spend $60, the transaction will go through even though you don’t have the money. But beware, you’ll also be hit with a significant overdraft fee. And one more note on overdrafts. You may receive an ATM or debit card with your new account. Make sure you know your balance each time you plan to use your plastic. Remember, a debit card is quite different from a credit card; you can only spend what you have.

You should also be aware of what the fees are for taking cash out from a different bank’s ATM machine or for letting your balance get below a certain amount. Some banks also limit how often you can withdraw from your savings account. These are all good questions to ask before you open your account.

What You’ll Need to Open the Account

If you’re not 18 yet, you’ll need a parent to be a custodian on the account. They’ll have access to your account and be able to see your purchases. Sometimes, they’ll also have to be a customer at the bank for you to receive a fee-free account.

You’ll also need to know your Social Security number and have some form of identification to prove you are who you say you are. Many banks will allow you to open an account online; most even have apps and online access where you can deposit checks remotely and check your balance at any time.

Once I got to college, I’d already had an account for a few years. That money came in handy when I wanted to study abroad, go to concerts with my friends or pay for the security deposit on my first apartment. It helped me finance the beginnings of my adult life without having to turn to my parents. And it all started with that first bank account.

Related Links

Conversation Starters

What are three benefits of opening your own bank account? Can you think of some that might not be mentioned in this article?

After reading the article, come up with a list of 10 important questions to bring with you on your first visit to the bank. Share your questions with a partner and discuss others that might help you better understand bank accounts.

Check out the link below for the article “Opening a Bank Account: Be the Boss of Your Own Money.” What else did you learn about navigating the banking system?

The podcast linked below offers a Dutch high school student’s view on financial awareness. He talks about the importance of bank account access for youth around the world. Research this topic. What advancements or strides have been made to create more access to bank accounts for high school students?

27 comments on “A Bank Account Is Your First Step to Financial Freedom

  1. I think this is a helpful article. Most teens already know that they should save early. But, this article elaborates on it much farther than saying about interest building up. I like how it used a real-life story that told you how the author felt. I liked how he stated plainly about how he felt he was taking a step to helping his future. That stood out for me, because I would personally feel the same way. I think making my first deposit into a savings account, knowing I’d get interest, would make me feel a lot better about how I’m handling my money. As the article stated, people should upgrade from piggy bank savings. I agree, because I’m currently saving over $1000 in a piggy bank, and it’s super easy to just open it up and take things out for unneeded purchases. This article actually motivated me a bit, too. I think I should start a savings account, like my older sister. She puts her money in there and it’s nice and safe, and I know she already has a lot in there. I also recommend for anyone who hasn’t read the article yet to take all of his tips and tricks into consideration, and make sure you’re prepared if you’re ready to start an account.

  2. I think a benefit of opening up my own bank account is that I will now be more careful what I spend my money on. My parents are always saying we need to be careful because we can’t keep spending money the way we do. I think if I had my own account, I would have to limit myself on what I spend.

  3. Wow! this is a very helpful article. I remember when i was younger i used to save my money out in a piggy bank or a my drawer and even a old birthday card that i recieved. This article can really help others get a bank account. I will definitely be starting my savings account after this/

  4. This article was very informative. People already know that they should save early. This article elaborates on it much farther than saying about interest building up. I like how it used a real-life story that told you how the author felt. It also helped to make sure you’re prepared if you’re ready to start an account.

  5. Im on my way to finical freedom. I opened my first savings account. Ive learned how to read my bamk state and learned about the intrest.

  6. This was very helpful information. I happy that this in formation is made available to youth. This will help you better understand you money and how banks work

  7. I have commented several time and it dont seem to save. So again this was a great read. This was very helpful with understand banking. Glad this information is made available to our youth

  8. Enjoyed all of the content. Great information to know. Glad I was able to learn early in life

  9. This is very helpful especially for me being a teen and learning more about the money world and how saving can do so much more than just buy something I want.

  10. I was given a lot of this information from my dad how ever this article made is more clear and gave much more detail and is easier to read than hearing your parents talk sometimes

  11. I particularly find this helpful since I am a teen who is learning more about saving money and how it can be used for more than just buying things.

  12. My mom taught me about the importance of having a bank account. I am now 14yrs old and I manage my accounts very carefully.

  13. This was a great article for me especially because I just opened up my first bank account and learning how to manage one.

  14. I opened up my first account when i was 14 and have my own debit card. I still need to work on money management but im glad I started early

  15. I think this article is very helpful and interesting but I already knew to create a bank account because at a young age my mom helps me with financial things so I don’t need nobody help and and it helps you manage finances

  16. I opened my first bank account at the age of 16 but I am not very good at managing my money so this article helped me greatly.

  17. My mom taught about having a bank account. She opened me up my first bank account when I was still a few months old, and later opened me up a GreenLight card. She set it up where the card either gives me permission to spend a certain amount of money, and automatically causes me to save. I Like this method because it helps me to budget more strategically.

  18. We were supposed to go open a bank account today, but my dad got an urgent matter to take care of. So, we will go one day this week.

  19. My mom has opened and bank account for me when I was younger and it will be entirely owned by me when I turn 18. I dont have a ton of money in the but my is always tell me to ask myself if I truly need some of the things I want like legos or books and that if it’s a no that I should save it

  20. I receive birthday wishes and New Year’s money from my elders every year; But I am not yet 18 years old and cannot open a bank account under my own name. I could have saved with my mother’s account, but what I did very poorly was that over the years, I managed my own money and spent it, leaving no balance. After I turn 18 years old, I will open my own account and save money well.

  21. Once you open your own bank account, you will be able to better understand how to manage your own money rather than letting someone else manage it for you. It is very important to not overspend because that can lead to debt and a bad credit score.

  22. Yes, I do agree on being very careful on who you open up your account with. Honestly I also feel it depends what you’re looking for and your current financial setting. For example if you are a college student similar to the individual in the article, you would fall under the category if investing with little risk. However I feel what was not addressed was the latter of being an older individual who is a little more financially comfortable and can invest a little riskier for greater reward.

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