Today, we’re going to explore checking and savings accounts and how they help us manage money wisely. Here are some important words we’ll talk about:
A checking account is like a special place at the bank where you keep money to pay for things. You can use a check or a debit card to spend this money. If you need cash, you can use your debit card at an ATM, as long as you have enough money in your account.
When you use a debit card, the money is taken out of your checking account right away. But with a credit card, you pay later and might have to pay extra if you don’t pay it off quickly.
To open a checking account, you usually need to put some money in first, called a deposit. When you have a job, your employer might use direct deposit to send your paycheck straight to your checking account. You can also set up automatic payments for things like your favorite streaming service, so the money comes out of your account without needing to write a check or use a debit card. Just make sure you don’t spend more than you have!
A savings account is where you keep money that you want to save for later. It’s not for everyday spending. Banks often limit how many times you can take money out of a savings account each month. If you take out money too often, you might have to pay a fee.
Savings accounts usually pay you a little extra money called interest. For example, if you put $100 in a savings account and earn 1.5% interest, you’ll get an extra $1.50 after a year. So, you’ll have $101.50 in total. If you keep adding money, you’ll earn even more interest over time!
You can connect your checking and savings accounts to move money between them. This is handy if you want to save extra money or need to use savings for something important.
Remember, checking accounts are for everyday spending, while savings accounts help you save money and earn interest. Knowing how to use both is a big step in becoming smart with money!
Now that you know about checking and savings accounts, think about how much money you want to save this year. Have fun learning and exploring more about money management!
Money Jar Activity: Create two jars at home labeled “Checking” and “Savings.” Use play money or coins to simulate deposits and withdrawals. Each week, decide how much “money” to put in each jar. Discuss with your family why you chose those amounts and what you might want to save for in the future. This activity helps you understand how to manage money between spending and saving.
Interest Experiment: With the help of an adult, use a calculator to see how interest works. Start with a pretend amount of $100 in your “savings account” and calculate how much interest you would earn at 1.5% after one year. Try different amounts and interest rates to see how your savings can grow over time. Discuss why saving money can be beneficial.
Everyday Observations: Over the next week, observe how your family uses checking and savings accounts. Ask questions like: How do we pay for groceries? Do we use a debit card or a check? How do we decide how much to save each month? Write down your observations and share them with your class to learn different ways families manage their money.
**Financial Literacy for Kids: Part Four – Checking and Savings Accounts**
Today, we are going to learn about checking and savings accounts and how they relate to financial literacy. Here are some key terms we will discuss:
– Checking Account
– Check
– Debit Card
– Credit Card
– Deposit
– Direct Deposit
– Savings Account
– Balance
Do you recognize any of these terms? Great! Let’s start with the term **checking account**. A checking account is an account you can use to pay for things using money you already have in the bank. You can write a check or use a debit card to spend this money. You can even go to an ATM with your debit card to withdraw cash, as long as you have money in your account.
When you use a debit card, the amount you spend is taken immediately from your checking account. In contrast, with a credit card, you pay over time and may incur interest, which means you often pay more than the original cost.
To open a checking account, most financial institutions require an initial deposit. The amount needed can vary depending on the institution. You can ask an adult to help you set up your own checking account when you’re old enough to have a job. Your employer might use direct deposit to send your paycheck directly to your checking account. You can also set up automatic payments for services, like your favorite streaming service. This way, the payment comes directly from your checking account without needing to write a check or use a debit card. Just be sure not to spend more money than you have in your account!
A **savings account** is designed for long-term money storage. It’s where you put money that you’re not ready to spend yet. Unlike checking accounts, savings accounts are not meant for daily transactions, and banks often limit the number of transactions you can make within a certain time frame. If you exceed this limit, the bank may charge you a fee.
Another difference is that savings accounts typically pay you interest on your average balance. For example, our friend Frankie Finance had her parents help her open a savings account last year. She deposited $100 and earned 1.5% yearly interest on that amount, which means she earned an extra $1.50 last year. So, the total amount in her savings account is now $101.50. This year, she plans to add more money to her savings account, which will earn her even more interest over time.
Here’s an interesting fact: you can link your checking and savings accounts together. This is helpful if you want to transfer money between accounts. It’s useful if you have extra money to move to savings or if you need to transfer money from your savings to your checking account to cover expenses.
Remember, checking accounts are for day-to-day purchases using money you already have, while savings accounts are for long-term money storage that can earn you interest. Understanding how to effectively use both is important for becoming financially literate.
Now that you know the basics of checking and savings accounts, you can visit our website to download this lesson plan. You can practice writing your own check and making a savings plan. How much money would you like to save this year? We hope you had fun learning with us! Visit us for thousands of free resources and solutions for teachers and homeschoolers.
