Personal Finance / Unit 3: Banking
3.1 Checking and Savings Accounts
Notes
Banks and credit unions keep money safe and let you spend, save and send it.
- A checking account is for everyday spending: debit card, checks, bill payments. It usually earns little or no interest.
- A savings account is for money you do not plan to spend soon. It earns interest, and the yearly rate is often shown as APY (annual percentage yield).
- Deposits at insured banks are protected by FDIC insurance (credit unions have a similar program, NCUA), up to a limit, if the institution fails.
- Example with a made-up rate: $2,000 at 1% APY earns about $2000 \times 0.01 = 20$, so $20 in one year.
Practice
Which account is best for paying everyday bills and using a debit card?
Checking accounts are designed for frequent transactions.
Mia keeps $3,000 in a savings account that pays 2% APY (a made-up rate). About how much interest will she earn in one year?
$3000 \times 0.02 = 60$.
What does FDIC insurance do?
FDIC insurance covers deposits, not investment gains.
Ready for more? Take the Unit 3 test.