From piggy bank to savings account
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It might seem like a good idea to hide your money under the mattress, but not only does that put it at risk of being stolen by your little sister, it also isn’t insured or earning interest. That’s why you want to open an account at a bank or credit union. Consider it Step 1 in “adulting.”
In this episode, host Yanely Espinal talks banking with Sahirenys Ortega Pierce, money educator at The Poised Lifestyle. They go over key differences between types of banks, what factors to consider when choosing the right account for you, and what you need to open your first account.
Think you’re financially inclined? Dig deeper into the world of banking:
- Learn more about Banking 101 from Investopedia
- Familiarize yourself with the ins and outs of checking accounts from NerdWallet
- Refresh your memory on the components of a check with Stony Brook University
Are you in an educational setting? Here’s a handy listening guide.
This podcast is presented in partnership with Greenlight: the money app for teens — with investing. For a limited time, our listeners can earn $10 when they sign up today for a Greenlight account.
Financially Inclined August 16, 2024 Transcript
Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting.
Yanely Espinal: Hey what’s up everybody, I’m Yanely Espinal. And welcome to Financially Inclined from Marketplace. We’re sharing money lessons for living life your own way. Now this episode is all about banking. Keeping your money in a bank account is the best way to make sure it’s safe and secure, period. And it can even allow you to grow your money by earning interest on your deposits. Sahirenys Ortega Pierce is the creator of the “High 5” banking method. And she’s joining me to break down what you need to know. She’s known as a money educator, and she spent years working in the banking industry, so she knows all the pro tips about how to manage your money better. You can find her on social media at @poisedfinancelifestyle, or on her website and blog, The Poised Lifestyle dot com. Alright, let’s get into it.
Yanely: So Sahirenys, you’ve worked with so many different customers who come to you and clients looking to make decisions about what kind of accounts to establish. And I feel like when you’re little you know, you always just have cash in like a piggy bank or you, you have like a shoebox with some cash in it. But then you become an adult, and you’re like, alright, I guess I should establish like some real accounts with like a bank. And so I want you to talk about why? Because we tell people to do it, but we don’t really explain why it’s so important to make that transition.
Sahirenys Ortega Pierce: This is such a great question, Yanely, and thank you again, for having me. When you’re having you know, that debate of putting that $20 bill your grandma gave you that birthday money that you got into your piggy bank. You know, I had when I had a Tweety Bird piggy bank, I was putting all my money in there. But once I started wanting to spend that money, it was kind of stuck in there. I either decide to break it, which I didn’t want to, it’s was kind of part of my bedroom, or you know, pick another routine of how to use my money more effectively. And when I started getting my first job, I was like, Okay, I need to figure out how to actually utilize this money because I can’t just keep these paychecks and put in my piggy bank, that doesn’t work out too well! I have to go into a bank and deposit this and get my money. So I can actually use it on the things that matter to me.
And the number one thing that you really want to be aware of when it comes to opening a bank account is that you now have easy access to your cash. You don’t have to be carrying cash for lunch money in your pocket anymore. You can now easily use a debit card and buy lunch, go to the movies or sign up for one of your favorite subscriptions.
Another main reason that you want to have a bank account, as well, is safety. That’s a really big thing. If you have your money in your piggy bank, or stuffed underneath your bed, under your mattress, anything like that, it can get damaged, it can get lost, or it can get “borrowed” by your little sister. That happened to me many times! [laugh] So I learned my lesson! I’m like, I can’t be having these, you know, $20 bills, $100 bills, so I want to make sure that it’s in a super safe place. And a bank is like a super vault for your money. So it is going to be safe in there. And you can feel safe that the only person who do take your money is you, and no one else is gonna be touching it.
Yanely: Yeah, no that’s important. Very important.
Sahirenys: It is! Especially when you’re like a teenager, you know, your siblings, they want to borrow use some money, too. They want to go to McDonald’s! But another great point about having a bank account, and a lot of people don’t realize, is that you can earn interest. When you have your money in your piggy bank it’s not earning no money. It’s making $0. So if you want your money to grow while you’re sleeping, you need to put that money in a bank account. I think that’s why it’s so important to you know, transition. It’s okay to have a piggy bank when you’re younger or have money hidden underneath your, in your sock drawer, but as you start getting older, you want to start having that in a more secure place that you can utilize it how you see fit.
Yanely: Yeah, I love those points that you make. I think security safety is so important. But I also think that there’s a lot of like, apps nowadays, right, that we have on our phones and new ones pop up like all the time, they make us think that our money is safe and secure and that we can use it effectively and that we have like a “bank account.” But even though you might not, right? So let us know like what do you think about those? Because I feel like some especially some teenagers I’ve met have like a Venmo account or Cash app, and they think that that is their bank account. So tell us is that the same? Is it okay to do that instead of an account?
Sahirenys: I think it’s a good starting point. So if you’re going to go to the movies, and your parents want you to have easy access, and transfer money to your friends here and there, I think that’s okay for like something I like to call “play money,” where you’re spending it on little things. But I think it’s important when you say get a real job or a part-time job, you get that paycheck, to actually have a place to store the majority of your money, especially when you have bills coming up.
You know, I remember back in the day when I was got my first job, one of the main things I wanted to add on to, you know, my new life that I had now had money was to add text messaging. Back in the day – it’s going to age me up a little bit – back in the day, it was not for free, okay? [laugh] You had to pay like $20 for unlimited text messaging.
Yanely: Yep.
Sahirenys: So I was like, “Okay, now that I have a big girl job, now I can, you know, but this payment on auto pay and have my unlimited text messaging.” But I can’t do that very easily from a Venmo or things of that nature, because, you know, it’s not meant realistically to pay bills. It’s more safer to have it in an actual checking account, so that I can directly deposit to pay those bills and have your paycheck also put into that account more safely and comfortably, where you can track it also a little bit more securely. I think security is a really big thing, especially right now in the age of technology: things are changing, you’re thinking one thing, and then you’re realizing, hey it’s not really like that. These you know, these Pay Pal and other is not, you know, secure to that same level as an actual bank is. There’s different regulations and different rules. So we need to make sure that we’re aware of that when we’re using those, you know, different banking options, or savings account, saving accounts to make sure we’re not, you know, getting too comfortable in the beginning stage. Once you got getting it big paychecks on there, make sure you’re moving to an actual bank.
Yanely: Yeah, and I love that language that you use of like “actual bank” or like “actual bank accounts,” because some of these services are just that: they’re banking as a service, but that’s not the same thing as actually working with a financial institution directly. And those institutions will give you these accounts and the different types. So you know what, while you might have like, you know, a stash or like an account to put some cash in, that’s not the same as either a checking account or a savings account. I know, those are like the two main types. Can you tell us the real difference between those and why those two are really important?
Sahirenys: The main purpose for a checking account is to easily spend your money and the way that you want to spend it. And when you have a checking account, do you actually get a debit card to make it really easy for you to go and spend money. And the awesome part about that debit card, you can use it in person, you can use it online. And you can also transfer money between accounts or to other people. You can set up automatic payments for you know, subscriptions that you really care about, like Spotify, or whatever it is that you actually want to, you know, use your money for.
Another thing that a lot of people don’t realize is that there is an unlimited amount of transactions that you can have on your debit card. With your depositing money, you can deposit as much money as you want. And you can take out as much money as you want, as long as you have the money in your account. You don’t want to go to zero!
Yanely: Right. Right.
Sahirenys: But if you want to put $1 into your account every single day, you can do that. If you want to take on $1 every single day, you can do that. So there’s a lot of more flexibility when it comes to having a checking account that I think is really important.
Now, when it comes to savings account is completely opposite: it’s not meant to be spent. The real purpose of a savings account is exactly what the name depicts it: is to save money. So much so that the banks actually don’t give you a debit card with this one. They don’t want you to pay bills out of this account. And they actually limit how many withdrawals and transactions you can make up to six every single month because the purpose of this account isn’t to be you know, spending money, it’s actually to save money.
Now the great part about savings accounts, and the main reason that you want to save in this account, is that it makes it super easy for you to earn a little bit of interest in this account as well. This is more common compared to the checking account. And you’re also not going to get this with PayPal, or any of the other accounts as well. Now, every single bank is different. Some banks offer more, some banks offer less, that’s good to know.
But the most important thing I want you guys to understand is that it’s safe, it is growing in a safe way. It’s not super, you know risky, like in the stock market or anything wild like that. It is a very controlled and safe way to save your money. So it’s gonna be there when you actually need it. And this is why having a savings account is one of the best ways to save for a rainy-day fund or for something you really want to buy.
I remember back in the day when I was in high school and I got my first part time job, I was saving a majority of my money actually, because I really, really wanted to buy a car. And you know, it took me some time to buy, to save up for that. But that’s okay. That’s why I have that savings account.
Yanely: I love that.
Sahirenys: One thing I wanted to bring up was account ownership. This is something that people don’t talk about when it comes to bank accounts. When you’re over 18, you can open up an individual bank account, just you. This is gonna say your name, your address, only you can login, only you can put money, take money out and all of that. But if you’re under 18, then you might want to consider doing a joint account with a parent. That’s something that I also did when I first opened up my first bank account: my mom and me went into the bank, and you know, we had an account together. And once I turned 18, she kind of transitioned that over to me and it became an individual. So it was a great way to make sure that you know I’m starting to learn about banking but in a soft way where my mom is helping me. And she is, you know, teaching you how to write a check, how to use your debit card, and how to check my, you know, my bank account statements and making sure everything looks good. It’s a great way to learn together, and then once you get older, you can transition that into an individual account. So it’s a great way to start.
Yanely: So where are the different types of like financial institutions or banks that we could go to if we wanted to open these types of accounts?
Sahirenys: So there are three different banking options you can have: you can go to a brick-and-mortar, which is kind of like… The pros of this is that you see them everywhere. They’re all over the place, probably the bank your mom probably took you into go in. And you know, they have really good technology, and they’re very secure. And which is really useful because if you’re traveling, you’re like, “Oh, I can go to this bank, here, I’m in New York I, can go to this bank here!” It works really good and have a big ATM network. Now, the cons with a brick-and-mortar is that they usually have higher fees, so that’s one thing a lot of people want to be aware of. But if you’re a teenager, or if you are in college, they also offer a lot of, you know, teen accounts and college accounts, where they can reduce those, but once you graduate, you have to be, you know, aware that that teen account is gonna be, you know, converted into a regular account, so you’re gonna lose some of those benefits.
Now, the second type of banking option you have are credit unions. The pros with credit unions is that they’re, you know, member-owned. So this is a really cool thing, because they can offer you better rates, they can give you better customer service. It’s a lot of perks to having a credit union, it’s really cool to have. Now the cons is that they have special criteria. So sometimes you can only join a credit union if you’re in that city, or if you’re in the military, for example. Or even if you go to a specific school; some universities have credit unions. And they give you a lot of great perks for you, like when you want to buy your first car, you want about your first home – very, very good rates. So a lot of people want to, you know, jump onto that, and take advantage of that. And those are also a lot of times physical as well, so you can walk into it.
Now the third type of banking option is going to be online-only banks. This is now my new favorite, I’ll be honest, I might be a little biased, but my favorite at this moment. Because, you know, the perks of this is that because everything’s online, they get to save money from the physical location, they don’t have to have as many tellers, they don’t need that many bankers, and also no security guards, so they can save a lot of money, and they can actually pass those savings on to you. So you can get higher rates, better customer service. And it’s really enticing because when you’re comfortable doing stuff online, this is a big pro, because now you can get more money when you’re saving money and when you’re you know, trying to do things in your checking account. It’s very awesome. Now the cons is that it is online only, so there’s no physical place to go to. You have to get comfortable just calling customer service and getting things resolved that way.
Yanely: Okay, so give us a quick bite-sized explanation for how we might go through the steps of opening one of these accounts on our own.
Sahirenys: All right, so you’re gonna need four things: the first one is going to be some type of ID. This can be a student ID, a driver’s license, a passport, or even a birth certificate – all of those counts. The second thing is going to be a social security number or ITN number. Both those are going to count as well, you want to make sure you have that your parents probably have that in a safe somewhere, so definitely ask. The next thing is going to be wanting to have your proof of date of birth, so you want to have your birth certificate or something to prove that you are who you say are so they open up the appropriate account for you. And again, because you’re going in with your parents, if you’re under 18, make sure they bring their ID as well. And last but not least, some banks want to have an initial deposit ready, so if you have a paycheck, or some money from your birthday definitely bring that with you, and you’re gonna be able to open up your bank account.
Yanely: You heard what Sahirenys said: when you start earning your own money, like when you get your first job, you’re gonna want to deposit that money into a bank account. Now there’s different options to choose from when it comes to the type of account that you open, and what kind of bank or credit union that you go with. But remember, choosing where to bank is all about what works best for you! The most important thing is to make sure that your account is insured. So for banks, that would be FDIC insurance. And for credit unions, it’s called NCUA insurance. This basically means that your money is protected and backed by the government. Now remember, if you’re under 18, you’re going to need an adult to help you open an account. So if you already know you’re interested in having your own checking or savings account, it’s a good idea to talk about this with the important adults in your life. All right, I know you got this, and I’ll catch you next time.
Financially Inclined is brought to you by Marketplace from American Public Media, in collaboration with Next Gen Personal Finance.
I’m your host, Yanely Espinal. Our Senior Producer is Zoë Saunders. Our Video Editor is Francesca Manto, and our Graphics Artist is Mallory Brangan. Our producer is Hannah Harris Green. And our intern is Marika Proctor. The podcast was edited by Courtney Bergsieker. Gary O’Keefe is our sound engineer. Bridget Bodnar is the Director of Podcasts. Caitlin Esch is Supervising Producer. Francesca Levy is the Executive Director. Neal Scarbrough is the VP & General Manager of Marketplace. Our theme music is by Wonderly.
Catch you next time!
Financially Inclined is funded in part by the Sy Syms Foundation, partnering with organizations and people working for a better and more just future since 1985. And special thanks to the Ranzetta Family Charitable Fund and Next Gen Personal Finance for continuing to support Marketplace in its work to make younger audiences smarter about the economy.
“Financially Inclined” is Marketplace’s first video podcast and our first show for teens! Each week we talk with some really smart people, like influencers, high school students and financial experts, to help make learning about money fun and simple. Consider us your one-stop-shop for financial confidence.
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The Ranzetta Family Charitable Fund and Next Gen Personal Finance, supports Marketplace’s work to make younger audiences smarter about the economy. Next Gen Personal Finance is a non-profit that believes all students benefit from having a financial education before they cross the stage at high school graduation.
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Greenlight is on a mission to empower parents to raise financially-smart teens — helping them learn to earn, save, spend wisely, and invest with a debit card and banking app made just for them. With the Greenlight app, parents can power their teens’ independence with instant money transfers, parent-paid interest, and built-in safety controls, including crash detection and SOS alerts. Teens use their Greenlight app to set up direct deposit, view their spending history, earn up to 5% on Savings, and learn to invest (with parent approval). Greenlight aims to create a world where everyone grows up to be financially healthy and happy. Today, we serve 6 million parents and kids, who have collectively saved more than $350 million and invested more than $20 million to date towards their financial futures. Learn all about Greenlight at https://greenlight.com/INCLINED
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The Sy Syms Foundation: Partnering with organizations and people working for a better and more just future since 1985.