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Financial Literacy

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Checking, savings, and why the separation matters

Checking, savings, and why the separation matters
Unit 1 — Where the money goes
 Unit 1 — Where the money goes
Checking, savings, and why the separation matters
 Checking, savings, and why the separation matters
The single most effective savings technique is not willpower. It is distance.
 The single most effective savings technique is not willpower. It is distance.
Lesson 2 of 8 — about 11 minutes — CareerStart.ai Financial Literacy
 Lesson 2 of 8 — about 11 minutes — CareerStart.ai Financial Literacy
What you will be able to do
What you will be able to do
 What you will be able to do
By the end of this lesson
 By the end of this lesson 1
Distinguish checking from savings accounts
 Distinguish checking from savings accounts 2
Explain why physical separation of money works
 Explain why physical separation of money works 3
Set up an automatic transfer
 Set up an automatic transfer
Two accounts do different jobs
Unit 1 — Where the money goes
 Unit 1 — Where the money goes
Two accounts do different jobs
 Two accounts do different jobs
A checking account is for money that is moving — your paycheck lands there and bills leave from there. It usually earns almost no interest, and it comes with a debit card, which is the point and also the problem. A savings account is for money that is waiting. It typically earns some interest and, critically, it is one step further from your hand.
 A checking account is for money that is moving — your paycheck lands there and bills leave from there. It usually earns almost no interest, and it comes with a debit card, which is the point and also the problem. A savings account is for money that is waiting. It typically earns some interest and, critically, it is one step further from your hand.
That extra step matters more than any budgeting app. Money you can spend with a tap gets spent. Money that requires a transfer, a delay, and a small deliberate decision usually does not.
 That extra step matters more than any budgeting app. Money you can spend with a tap gets spent. Money that requires a transfer, a delay, and a small deliberate decision usually does not.
Automate it so you never make the choice
Unit 1 — Where the money goes
 Unit 1 — Where the money goes
Automate it so you never make the choice
 Automate it so you never make the choice
Set a recurring transfer for the day after payday. Twenty dollars a check is fine — the amount matters less than the mechanism. You are not trying to save enough to matter this month; you are trying to make saving something that happens without you.
 Set a recurring transfer for the day after payday. Twenty dollars a check is fine — the amount matters less than the mechanism. You are not trying to save enough to matter this month; you are trying to make saving something that happens without you.
Two things worth checking before opening any account: whether it charges a monthly maintenance fee (many student accounts do not) and what the minimum balance is. Fees quietly undo small savings.
 Two things worth checking before opening any account: whether it charges a monthly maintenance fee (many student accounts do not) and what the minimum balance is. Fees quietly undo small savings.
Key term: Available balance
Key term
 Key term
Available balance
 Available balance
What you can actually spend right now — as opposed to your current balance, which may include deposits that have not cleared or exclude charges that have not posted. Overdrafts usually happen in the gap between those two numbers.
 What you can actually spend right now — as opposed to your current balance, which may include deposits that have not cleared or exclude charges that have not posted. Overdrafts usually happen in the gap between those two numbers.
Why it matters at work
Why it matters at work
 Why it matters at work
Ask your employer whether direct deposit can be split across two accounts. Many payroll systems allow it, which means your savings can leave before it ever touches checking.
 Ask your employer whether direct deposit can be split across two accounts. Many payroll systems allow it, which means your savings can leave before it ever touches checking.
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