Saving money
is important. Good savings makes it possible for people to buy games
and toys, pay for college and deal with emergencies. The bank is
a great place to save your money. To save your money at the bank
you open a savings account. A savings account is
a safe place where the bank keeps your money. The account has your
name on it so the bank knows it’s your money.
Once your
account is open, you can add money to it whenever you want. The
money you add to your account is called a deposit.
When you want to add money to your account you first must fill out
a deposit slip. The deposit slip tells the bank
how much money you want to add. Below is an example of a deposit
slip:
1. Write the
date you are making the deposit.
2. If you are depositing currency (paper bills), write
the total amount here.
3. If you are depositing coins, write the total amount
here.
4. If you are depositing a check, write the bank transit
number here, which is the top portion of the two-part number printed in
the upper corner of the check.
5. Write the amount of the check here.
6. If you are depositing more checks than can be listed
on the front, continue to list them on the back, and write the total amount
of the checks on back here.
7. Write the total amount you are depositing here.
8. If you are making a deposit inside a bank with a teller
and you want to receive cash back from your deposit, write the amount
you want.
9. Write the total amount (less cash back) of your deposit.
Sometimes
when you have saved your money for a while, you may want some of
it back to buy something special like a bunch of CDs or an Xbox.
When you want to get your money back, you make a withdrawal.
To make a withdrawal, give the bank teller a piece of paper called
a withdrawal slip. A withdrawal slip is the same
as a deposit slip, but instead of putting money into your account,
the withdrawal slip tells the bank to take money out.
The total of all your money is called a balance.
It is very important to keep track of your balance so you don’t
try to take out more money then you have.
The best reason to keep your money in a bank is interest!
Interest is money that the bank gives to you for saving your money.
The more money you keep in your savings account, the more the
bank will give you. That’s why it’s good to save as
much as you can for as long as you can.
When you save your money in the bank, it doesn’t just sit
there waiting for you to come back and get it. The bank uses your
money, to make more money. When you save your money, you are really
loaning it to the bank. Interest is what the bank gives you for
letting them use your money to make money.
The chart below
shows how much money you can make if you save a dollar a day in
a savings account, compared to keeping your money at home. When
you deposit money in the bank the interest is calculated by a
percentage of the total amount. The most common percentage is
5% of the total amount. The interest can also be calculated by
compounding. Compound interest is when money
is earned on the total amount including interest already earned.
The total amount changes because you must figure in the interest
already earned from the past day, month or year. For our example
below, we are using daily compounding which means everyday the
interest is earned on the new amount that includes the interest
already earned.
No Interest
5% Daily Compounding
Year 1
$365
$374
Year 5
$1,825
$2,073
Year 10
$3,650
$4,735
Year 20
$10,950
$25,415
At
the end of year one, $9 extra was made with
compounding interest. The real power of interest
is at the end of 30 years. $14,465 extra was
made!
When you borrow money
from the bank, it’s not yours to keep. You have to pay
it back. You pay the bank a little bit at a time. You pay the
bank what you borrowed, and you also pay them a little extra
for letting you borrow it. The little bit extra you pay back
is also called interest. Loans are necessary on more expensive
items, such as a car or a house.
Lois Loan says: “On
to the next adventure!!” Let’s go!
