Money 101: Boost Your Financial Literacy
September 8, 2020
Share Buttons
Links to external websites are not managed by Varo or The Bancorp Bank
Learning financial literacy can be a whirlwind of confusing terms and boring reading.
It’s also your key to financial success.
Today we’re going to teach you some of the most common terms you’ll come across on this journey.
A checking account is a basic type of bank account. It’ll keep your money safe, pay using checks, take out cash, or pay from it using a debit card.
Some banks charge monthly service fees to maintain an account. You’ll need to read the fine print to see what fees your account may charge you.
Your bank may also charge ATM fees when you withdraw cash from an ATM outside your bank’s network.
If you take out more money than you have in your account, you might get charged an overdraft fee. It’s a best practice to keep track of how much money is in your account on a daily basis.
A savings account is another type of bank account. Usually these earn interest, or money back on the amount you're saving, but you’re limited to how many times per month you can access the money.
A money market account is an account that earns interest, but still makes it easy to use your money like a checking account.
The main difference between this and checking accounts are they often have minimum balance requirements. If you dip below the balance, you may pay a fee.
Savings accounts have annual percentage yields (APY). This is the amount of interest the bank pays you for saving money with them.
Always compare APY rates online before opening an account. The higher the APY the more money you’ll make from interest.
High-yield savings accounts offer higher APYs—20 percent higher in many cases—than a traditional savings account.
Many of the high-yield savings accounts with the highest APYs are online only banks. Again, shop around to find the best rates and lowest fees.
Investing is when you put money into a company or asset hoping it will grow in value.
You can invest in real estate, gold, or the stock market, to name a few.
Investments are always risky. Whatever you put money into could lose value, so do lots of research before you buy an asset.
A bull market is when investors feel confident and optimistic, which leads to a profitable stock market. Bull markets are good for investors.
A bear market is the opposite of a bull market. Investors are uncertain about the future which causes the value of assets to dip.
Retirement may seem like a long way off, but you want to start saving for it as soon as possible. The longer you save, the more interest your money will earn, which means the more you’ll have in retirement.
An individual retirement account (IRA) is a savings account with special tax benefits. Your account will grow over time, but can’t be withdrawn before age 72.
The money you put into your IRA will be invested. You can manage it yourself or have it taken care of by a bank or broker.
A Roth IRA allows you to save money for retirement by taxing the money you put into the account, but not taxing it when you take it out at retirement age. You are also not taxed on any investment growth.
A simplified employee pension (SEP IRA) is an option for small business owners and those who are self-employed and don’t have the option of getting a 401(k) from an employer. SEP IRAs have much higher contribution limits than standard IRAs.
A 401(k) is a tax-advantaged retirement plan offered through a for-profit employer. Often, employers will match a certain percentage of your income when it’s deposited in your 401(k).
Financial literacy is an important step in being money savvy. This is just the beginning of a lifelong journey.
Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s).
Learning financial literacy can be a whirlwind of confusing terms and boring reading.
It’s also your key to financial success.
Today we’re going to teach you some of the most common terms you’ll come across on this journey.
Checking Accounts
A checking account is a basic type of bank account. It’ll keep your money safe, pay using checks, take out cash, or pay from it using a debit card.
Monthly Service Fees
Some banks charge monthly service fees to maintain an account. You’ll need to read the fine print to see what fees your account may charge you.
ATM Fees
Your bank may also charge ATM fees when you withdraw cash from an ATM outside your bank’s network.
Overdraft Fees
If you take out more money than you have in your account, you might get charged an overdraft fee. It’s a best practice to keep track of how much money is in your account on a daily basis.
Savings Accounts
A savings account is another type of bank account. Usually these earn interest, or money back on the amount you're saving, but you’re limited to how many times per month you can access the money.
Money Market
A money market account is an account that earns interest, but still makes it easy to use your money like a checking account.
The main difference between this and checking accounts are they often have minimum balance requirements. If you dip below the balance, you may pay a fee.
APY
Savings accounts have annual percentage yields (APY). This is the amount of interest the bank pays you for saving money with them.
Always compare APY rates online before opening an account. The higher the APY the more money you’ll make from interest.
High-Yield Savings Account
High-yield savings accounts offer higher APYs—20 percent higher in many cases—than a traditional savings account.
Many of the high-yield savings accounts with the highest APYs are online only banks. Again, shop around to find the best rates and lowest fees.
Investing
Investing is when you put money into a company or asset hoping it will grow in value.
You can invest in real estate, gold, or the stock market, to name a few.
Investments are always risky. Whatever you put money into could lose value, so do lots of research before you buy an asset.
Bull Market
A bull market is when investors feel confident and optimistic, which leads to a profitable stock market. Bull markets are good for investors.
Bear Market
A bear market is the opposite of a bull market. Investors are uncertain about the future which causes the value of assets to dip.
Retirement Account
Retirement may seem like a long way off, but you want to start saving for it as soon as possible. The longer you save, the more interest your money will earn, which means the more you’ll have in retirement.
IRA
An individual retirement account (IRA) is a savings account with special tax benefits. Your account will grow over time, but can’t be withdrawn before age 72.
The money you put into your IRA will be invested. You can manage it yourself or have it taken care of by a bank or broker.
Roth IRA
A Roth IRA allows you to save money for retirement by taxing the money you put into the account, but not taxing it when you take it out at retirement age. You are also not taxed on any investment growth.
SEP IRA
A simplified employee pension (SEP IRA) is an option for small business owners and those who are self-employed and don’t have the option of getting a 401(k) from an employer. SEP IRAs have much higher contribution limits than standard IRAs.
401(k)
A 401(k) is a tax-advantaged retirement plan offered through a for-profit employer. Often, employers will match a certain percentage of your income when it’s deposited in your 401(k).
Financial literacy is an important step in being money savvy. This is just the beginning of a lifelong journey.
Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s).
Share Buttons
Writer Bio
Sarah Netter
Sarah Netter is a freelance writer based in New Orleans, Louisiana. Her work has appeared in the New York Times, the Washington Post, ABC News and RollingStone.com.