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If you’re going to develop strong financial capabilities, you need to master the basics first. Basic financial products help you to develop a stronger understanding of finances and be able to become more successful in your own finances. These are just a few of the basic financial products you need to understand.
A savings account is the most basic type of financial account that everyone should possess. A savings account allows you to deposit a sum of money into the bank for safekeeping, and withdraw as you’d like. The bank that you have an account with will also often add an interest onto your account each year to help you consistently get more money as you save. Savings accounts are helpful for creating an emergency fund, and having money set aside for anything that you may need during your life. However, it’s important to note the difference between a saving’s account and a checking account. You cannot use a debit card with a saving’s account. To access the money in your savings account, you need to withdraw it in cash.
Credit cards are one of the best ways for people to boost their credit score. Many people only know of the downsides of credit cards. Credit cards allow you to make purchases on credit and pay back the sum later. Some people go too far with this, and end up accumulating more debt than they can pay back. However, credit cards can also be incredibly beneficial to you. One of the best ways to develop a higher credit score is to use a credit card in place of a debit card. Use a credit card to make your basic purchases, but be sure to never spend more than you have available in your budget. Pay it off every month, and you’ll never have to worry about interest. You can also get cashback and travel points through using a credit card this way. However, be wary of any unusual charges. Strange activity on your credit card statements may be a sign of identity theft.
Checking accounts are savings accounts’ mature older siblings. Just like a savings account, checking accounts are bank accounts that you can deposit money into. However, checking accounts come with quite a bit more freedom than savings accounts. With a checking account, you can use a debit card that links to the account instead of withdrawing cash. You also have the opportunity to pay bills directly from your account, write and deposit checks, and transfer money to others’ accounts.
The first step in financial literacy is understanding the basic financial products you have to deal with on a regular basis. Doing so allows you to develop a strong foundation on which you can build further financial knowledge. These are a few of the basic financial products you should familiarize yourself with.
Check out this blog post on how to avoid dumb debts!