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River Hill Magazine: First Steps to Establishing a Banking Relationship for Students

In the world we live in today there is a specific place to keep money where it is impervious, the bank. However, your money can be kept in different accounts at the bank for different purposes. Two of the primary ways that students under the age of 16 can accumulate money in the bank are a savings account and a CD (certificate of deposit). Both accounts work efficiently in their own ways. A savings account is operated for short- term money that can be accessed when needed. On the other hand, a CD is used for longer-term money and cannot be accessed as easily.

A savings account is the most effective way to preserve money in the bank for short-term use. The reason why money that may be needed at any time should be kept in a savings account versus a CD is because of the way a savings account works. The user of a savings account is able to easily transfer money back and forth from the account using cash and a deposit ticket. Not only does the user have an easy way to regulate how money goes into the account, but as well as out of the account.  By the click of a few buttons on an ATM, or the choice of a few words to a bank teller, the account holder can have the money they need in seconds.  Whether it is for food, a gift, video games, or movies, a savings account is perfect for keeping short- term money that is easy to manage.

For long- term necessities such as insurance, a car, or a house, a CD (certificate of deposit) is an exceptional way to save the money for those commodities. Unlike a savings account where money can be withdrawn quickly, money cannot be withdrawn quickly in a CD. In fact, the account holder of a CD cannot touch their money for a set period of time. However, if the money is touched within that time frame, the bank penalizes the account holder with a fee.  The longer the money is set to be in the account determines the interest rate (% of money the bank credits to the account) will be.  This set period of time is what holds the user back from touching their money, and creates a better environment for long-term savings.

Both a savings account and a CD (certificate of deposit) are extremely effective ways to save money for different uses. To transfer money in and out of an account that is easy to access and withdraw money from, at any time a savings account should be used. If someone is saving money for long- term goals where money should not be touched, and is harder to get to, a CD is the most appropriate account to use.

After a student has reached the minimum age of 16, there may be additional banking options available.  This could be a topic for a future article.

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River Hill resident, Mikhail Parr, is a sophomore at River Hill High School and also working with Parr Financial Solutions Inc. www.ParrFinancialSolutions.com