The Young Adult’s Guide to Managing a Bank Account: Adulting 101

Once upon a time, high school students learned checking account and check writing basics in Home Economics class. Now we’re in a brave new world of online banking and budgeting apps, which leads some people to say guides such as this one are no longer necessary.

We disagree. The fundamentals of managing a checking account are just as important to learn as ever. You see, it may be easier now to make everyday purchases with a debit card, pay your bills online, and receive your paycheck via direct deposit, but that doesn’t always lead to better record keeping. At the end of the day, nothing can replace the personal attention you give to managing and balancing your checking account.

Keep reading for our best tips to help you manage your checking account and enter the world of personal money management.

How does a checking account work?

Once you start working, you’ll likely need a checking account because nearly all employers use direct deposit to distribute paychecks. Checking accounts are easy to open and use; however, they are also a responsibility that requires attention. If you aren’t careful you could end up with an unpleasant surprise, such as an overdraft fee, or insufficient funds in your account to cover a debit card transaction at the store. Here are the primary features of checking accounts to pay attention to as you select a bank and open your account:

Requirements to open an account: You’ll need to provide basic information about yourself as well as proof of address and a government-issued photo ID. A minimum deposit is also required, though these are usually small. For example, our UB Checking requires only a $25 initial deposit.

Fees: This is an important category to assess when choosing a checking account. Most banks, including Union Bank, offer several types of checking accounts. You can find information about fees on the bank’s website. Even if an account is advertised as “totally free” you should still examine the fine print. Many checking accounts can be fee-free but only if you follow the rules, such as maintaining a daily minimum balance and signing up for paperless statements.

If you are a high school or college student, or a young adult just starting your career, you probably don’t have a lot of extra money. Therefore, you’ll want a checking account with a low minimum balance requirement. For example, our Young Adult Checking only requires a $250 minimum daily balance to avoid monthly service charges.

Overdraft: This occurs anytime your balance dips below zero. So whether it’s a large bill payment or a $5 coffee shop purchase that takes your account into the negative, when you overdraw your account you will have to deposit money right away and/or pay an overdraft fee.

You should always ask your bank about their overdraft policy when you open an account. Some banks charge a fee for each transaction after the account is zero (for example, you don’t realize your balance is negative as you use your debit card throughout the day). Others may refuse to honor checks you’ve written, ATM withdrawals, or debit card transactions once you hit zero.

Almost all banks these days also offer overdraft protection. You may be able to link a savings account for auto transfers when your checking account balance falls below zero. Overdraft protection can also consist of a linked line of credit, but that requires credit approval first.

Direct Deposit: Gone are the days when paychecks were physically distributed on Fridays. Now most companies use direct deposit, which typically credits your checking account for the amount of your paycheck the night before payday. Employees also like direct deposit for the convenience. To use direct deposit with your checking account, you can fill out a form with basic account information and submit it to HR.

Auto Bill Pay: Another welcome casualty of the digital age is the practice of receiving a physical bill in the mail, writing a check and finding a stamp to mail back your payment. Sure, you can still pay this way but why would you?

The same technology that makes direct deposit possible also allows you to pay your bills online with a debit card, and to set up recurring payments from your checking. Besides the convenience of auto bill pay, setting up your payments in advance can help you avoid late fees and negative effects on your credit score—yet another reason it’s so important to manage and balance your checking account.

Debit cards: These versatile cards enable you to withdraw cash from an ATM, pay bills and make purchases online, make in-store payments with a pin or signature, and more. Originally referred to as “check cards,” debit cards have largely replaced checks with a faster, more convenient way to pay. There are generally no fees for using your debit card, unlike a credit card that may accrue interest or charge annual fees. At Union Bank we offer the Mastercard Enhanced Debit Card, which comes with added benefits and protections.

Individual vs. Joint Accounts: This is the last choice you need to make when opening a checking account. If you are under eighteen, you’ll need to open a joint account with a parent or guardian. Adults can have their own individual checking account.

A joint account is one in which both people named on the account have equal access to depositing and withdrawing money. Therefore, you only want to open a joint account with someone you can trust. They are most common in romantic relationships in which two people are married or living together. However, some couples stick to separate accounts. If the relationship ends you would need to close the joint account and open your own checking account.

How to write a check

While debit transactions have eliminated a lot of need for check writing, there are still occasions in which you’ll have to write an old-fashioned check. Here’s how to do it:

• Start with the date in the upper right hand corner. There is no fixed format for date writing–you can write out the month, as in “January 1, 2019,” or you can write it all in numbers, as in “1/1/19.”
• Next, you need to write out who the check is for on the “Pay to the order of” line. If it’s an individual, write out their first and last name. For a couple with different last names, you would write out both their names: John Smith and Jane Doe. If they have the same last name you could write “Mr. and Mrs. John Smith” or “John and Jane Smith.” If you’re writing a check to a store, institution, or organization, you may write out the full name or use an abbreviation (for example, “United Methodist Church” could be UMC). Check with the recipient of your check if you’re not sure who to make it out to.
• The amount is perhaps the most important part of the check, so you write it twice. First in numerical format in the little box with the dollar sign. For example, “$100 00/100” or “$150 65/100” Then you write the amount out in words in the line below with “DOLLARS” at the end. For example, “One Hundred and 00/100” or “One Hundred Fifty and 65/100.” Some people fill in the rest of the space with a line so it can’t be tampered with.
• At the bottom you’ll find a Memo. This is optional–the bank doesn’t need it but you may find it useful to record a category of spending for your records.
• Last but not least, sign the check with your name as it appears in the upper left hand corner of the check.

How to balance a checkbook

Balancing your checkbook may be the least glamorous aspect of having a checking account. However, it is one of the most important personal finance habits you can develop, especially if you write several checks a month. That’s because a check isn’t deducted from your account immediately like electronic transactions are. If the recipient of your check waits a week or two to deposit it and you haven’t recorded the check and reconciled your account, you’re likely to forget. When the check does come out it could cause an overdraft or negatively impact your budget because you already spent that money.

Checkbooks come with a ledger that you can use for balancing your account. However, you could also use a spreadsheet or a financial software application if you prefer to do things electronically. Record the check number, recipient, and amount. Then count these checks against your available balance until they’ve come out of your account. That saves you from thinking you have more money than you really do and spending what you’ve already allotted to a check.

It’s also a good idea to record all the transactions you perform in your checking account and check your records against your monthly bank statement or online banking ledger. This way you’ll notice any unexpected bank fees or suspicious transactions that could be a sign of identity theft.

How to Open a Checking Account

As mentioned above, it’s pretty easy to open a checking account. To open a Union Bank checking account, just visit one of our branches in Northern Vermont (Berlin, Danville, Fairfax, Hardwick, Jeffersonville, Johnson, Lyndonville, Morrisville, St. Albans, St. Johnsbury, Stowe, Jericho and Williston) or New Hampshire (Groveton, Lincoln, Littleton, and North Woodstock). Our friendly staff will help you compare options, complete required documentation, and issue a debit card if you want one. Just bring your official photo ID and proof of address.

Security and Fraud Protection Best Practices

We are all aware of big data breaches and the threat they pose to protecting our identities and financial accounts. Here’s what you can do to keep your checking account secure:

• Only carry your debit card and checkbook when you know you need them. In particular, checkbooks should be kept at home in a safe place instead of carried around in a purse, car, or jacket pocket.
• Memorize your debit card pin instead of keeping it in your wallet or on your card. Don’t share this information with anyone and make sure no one can see when you are entering your PIN at the ATM.
• If your debit card or checkbook is lost or stolen, call your bank immediately to report the missing item. The faster you alert your bank, the less likely you will be liable for unauthorized charges made to your account.
• Remember that Union Bank will never contact you and ask for your personal information, and other reputable companies and financial institutions shouldn’t either. Browse our Security page for more resources on protecting your accounts and identity.

Compare checking accounts to other types of deposit accounts

While your checking account is likely to be the foundation of your financial life, you may be wondering how it differs from other options such as a Savings or Money Market account, or a Certificate of Deposit (CD).

Checking vs. Savings Account

These two accounts share some features such as direct deposit, auto bill pay, online transfers, and more. However, federal regulation limits the number of debits on a savings account to six per month. So while a savings account is a great place to store money for a specific goal, like a vacation, or maintain an emergency fund, a checking account works better as a primary account for everyday expenses and bill pay. Learn more about our Personal Statement Savings account.

Checking vs. Money Market Account

A money market account comes with the same similarities and restrictions as a savings account. However, it generally offers a higher interest rate and has a higher minimum balance requirement, and unlike a savings account, you may access funds in this account using a check. So while you might not want to use a Money Market account for short-term savings goals that would draw down the balance, it’s a great place to keep an emergency fund or save for retirement with the protection of FDIC insurance. Learn more about our Personal Money Market accounts.

Checking vs. Certificate of Deposit (CD)

CDs generally offer the highest interest rates in return for a commitment to keep your money in the bank for a predetermined length of time. A CD account has little in common with a checking account but it’s a great place to save for both short-term and longer goals. For example, people who want to avoid the risks of the stock market can take advantage of our CDARS program to receive FDIC insurance on more than $250,000 (the limit for a single institution). Learn more about CD accounts here.

Stay Local. Go Far. with Union Bank!

Now that you’ve passed Adulting 101, you’re ready to open a checking account. Check out all of the checking account options we offer and visit your nearest Union Bank location in Northern Vermont and New Hampshire to open an account. Already banking with us? Make sure you’re taking advantage of all the benefits that come with your checking account and Debit Mastercard. You can also create your own custom debit card design. If you’re looking for even more perks and are able to maintain a higher deposit balance, check out our Advantage Checking.