Balancing Your Checking Account
/Well done! You’ve gone through the process of creating your bank accounts where you’ve stored your hard-earned cash You’re now able to pay for goods and services without using physical coins and bills. you may be thinking, does this mean you can buy things, like an Xbox Series X, without using money? Wouldn’t that mean the Xbox is free? Though it may seem like paying for things without physical currency means these items are “free”, there are other ways to pay for them. One way to pay is by using checks, which were explained in the previous lesson. Another way is through the use of a debit card, which accesses the money you’ve placed in your checking account when you use it. With this ability to easily use the money in your checking account, how will you keep track of how much money you have in your accounts and how much you’ve already used?
When you’ve placed your money in a checking account, your bank will send you a statement every month, which could look something like the figure below. This statement includes every transaction you’ve made using the funds of that account for the entire month. So, every time you write a check or use a debit card to pay for, say, a new pair of Airpods, the bank will record the amount of money used to pay for the item. This is called a withdrawal. The bank also records when you deposit more money into your account. For instance, if you were to sell your Xbox One and its controllers to GameStop, you could deposit the money you received into your account and the bank would record the amount of money you placed into the account. The statement compiles all of your transactions involving the funds from your account every month. In order to keep track of how much money you have, all you have to do is remember everything you paid for and exactly how much you paid for it, as well as exactly how much money you placed into the account. It seems easy, right? But wait, what if you pay for 20 different items, like groceries, rent, and other expenses outlined in the budget you created? That may be too much to remember. If you don’t know how much money you have, how do you know if you have enough money to buy those Airpods?
Luckily, there is a simple process to keep track of how much money you have in your account called balancing. At the beginning of each month, you should write down how much money you currently have in your checking account. Then, every time you make a withdrawal to pay for something, you write down the cost and subtract this number from the amount of money you have in your account. When you deposit more funds into your account, you would add this number to the amount of money you have in your account. By going through this simple process, you are able to see exactly how much money you have available for use. An example of this process is provided below.
Now, you may be asking, why should I write all of these numbers down myself when my bank does it for me? Shouldn’t I just trust my bank? Well, consider your balancing of the account to be checking the bank’s work. While banks are often correct in recording transactions and amounts paid, mistakes do happen. For this reason, it is important to personally balance your accounts. Additionally, it is important to read your bank statement monthly to make sure that you didn’t forget to record any transactions. Consider the balancing process to be double-checking to ensure the amount of money in your account is completely accurate. By doing this, you can be certain that you have enough money to buy that Xbox Series X or those new Airpods. Please complete the worksheet below for practice with balancing a checking account. See you guys next week!
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Worksheet and Answer Key:
https://drive.google.com/drive/u/0/folders/0B88etgrEjzcyZ3NvT0pieDZrdm8
Statement and balancing example citations:
“Home - Hands on Banking - Financial Education.” Hands on Banking, 1 July 2020, handsonbanking.org/adults/basics-banking-services/using-managing-accounts/how-to-read-your-statement/.
“Home - Hands on Banking - Financial Education.” Hands on Banking, 1 July 2020, handsonbanking.org/adults/basics-banking-services/using-managing-accounts/how-to-use-your-transaction-register/.
Additional Resource:
Balancing a Check Register - https://www.youtube.com/watch?v=XPYNoGhAMWo