Basic Personal Finance Terms
Your financial wellness is our top priority. That's why we're starting a series of posts to inform you on how to manage your finances in the U.S.
What is financial wellness?
Financial wellness is about managing your money in a healthy way so that you can protect and take care of what matters most: your loved ones.
When you buy a house in the city you just moved to, save money from your paycheck after working hard all week, buy food at the supermarket, or send money to your family in another country, you are using finance.
One of the the most important parts of finance is a budget.
What is a budget?
A budget is a plan for your money.
Making a plan for your money can be hard, so let's try to simplify it together. Try starting out by estimating how much money you make per day.
If you earn $50 per day, spend $5 on a bus to work and another $5 on lunch, then you will have $40 at the end of the day. If you did this for a year, you would have $14,600! If you did that for ten years, you would have saved $146,000!
If you put that $14,600 in a savings account with a 2% interest rate and added $100 per month, then you would have more than $30,000 in ten years! Your money would have earned you over $4,000 during that time!
Saving your money is crucial for your financial well-being.
What is a savings account?
A savings account is an account opened with a bank where you can store your money and the bank will pay you to leave it there! Your money will earn you money! The amount of money you earn will depend on the interest rate they offer, and the amount you save with them.
Is my money safe?
Yes! The US banking system is highly regulated and the government works hard to protect consumers and their money.
It's a lot to read about, luckily we're here to give you the highlights. The government protects up to $250,000 of your money that is held with banks, so you don't have to worry about losing your money if you leave it with the banks. If you're interested in reading more about it Wikipedia has more details on this topic but their Spanish page is limited, so we'll cover this in more detail later.
Can I take money out?
Yes, of course you can.
But you shouldn't really be withdrawing money frequently because this (1) may incur charges (we don't like fees) and (2) means you won't be saving. So, if you're using your savings account often then you may want to open a checking account.
What is a checking account?
A checking account is an account used when you're making a lot of transactions.
A checking account typically issues you a debit card, which you can use in most stores to pay for things. A checking account is an important tool for storing money, receiving transfers, and depositing checks.
Here at Unidos, we want to make sure that our community is well-informed about their finances. We know money isn’t the most important thing in life but we also know how complicated the US financial system can be.
So, don’t worry, we’re going to take this journey together. Unidos.