A seedy, dishonest bank may take advantage of a young adult’s inexperience in the banking world. All too often, such institutions will leverage youthful ignorance by manipulating the account holder to benefit themselves.
By taking the initiative on your financial education, you’re significantly lessening your chances of receiving unreliable service. Plus, counting on FSCB’s money management experts to educate you ensures you have all the tools you need to start your financial journey.
Banking Terms & Definitions
Adding to our existing list of common financial literacy terms, below is a handful of additional vocabulary to help you more easily navigate the world of banking:
- Accrued Interest: Interest that has incurred for a loan that the borrower has yet to pay off; the interest that accumulates between regular payments
- Amortization: The distribution of an intangible asset’s cost over time; financial institutions use amortization schedules to develop a loan repayment plan based on a predetermined maturity date
- Assets: A resource with some sort of financial value according to financial institutions; tangible assets can be a home or car, and intangible assets exist as stocks and bonds, for example
- Bank Custodian: The party responsible for safeguarding certain types of assets; this person or institution has physical possession of financial instruments such as cash or stock certificates
- Beneficiary: The person or party that’s legally appointed to receive benefits or payouts from a policy, likely a life insurance policy or will and testament
- Deferred Payment: When the due date for a payment is delayed or paused; occurs during a deferment period
- Dividends: The regular payout from the host company to a shareholder for holding stock
- Fiduciary: The role of someone who legally manages a person’s assets on their behalf for their benefit
- Guarantor: The party responsible for paying a debt if the borrower defaults on their loan
- Interest Payment: The amount charged regularly in addition to the loan sum for borrowing
- Lien: A legal claim against physical property used as collateral to repay a debt; owing a sum of money to a lienholder in exchange for a type of property (e.g., home, car, and so on)
- Overdraft: Charging or withdrawing more from an account than the available balance
- Principal Payment: The initial loan amount or the sum of how much the borrower still owes
- Subsidized Loan: A type of student loan that doesn’t accrue interest while the borrower is in school or during periods of deferment; interest begins to build on the loan after the student graduates or withdraws
- Unsubsidized Loan: A type of student loan that begins accruing interest immediately after it’s dispersed, including while the borrower is enrolled
Still seeing words and phrases you don’t recognize when assessing your financial options? Refer to our handy glossary of wealth-building terms for even more helpful definitions. And when the time comes to explore home ownership, check out our list of homeowner-specific terminology for some basic information you need to get started.
Banking Tips for Young Adults
When getting a grasp on your financial future, it helps to have a knowledgeable advisor in your corner to walk you through the more nuanced endeavors. The FSCB team has numerous financial resources available for building your spending and saving skills, plus the following timeless advice:
Tip No. 1: Automated banking is your friend.
Good money management and banking automation go hand in hand. Direct deposit of paychecks and dividends streamlines the receipt of your payouts. Additionally, setting up your bank account to automatically allocate funds for bills and debts ensures timely payments. Plus, automating a regular transfer to your savings account—even if it’s not a huge amount—can help to gradually build wealth over time.
Tip No. 2: Memorize your Social Security number (SSN).
From here on out, nearly every legal application or official document will ask for your SSN to verify your identity. This series of numbers typically consists of three digits followed by a hyphen, two digits, another hyphen, then four final digits (Ex: 123-45-6789).
Many institutions may only ask for the last four digits for confirmation with another source, but you should make a point to memorize the whole number. Since this number is considered incredibly sensitive personal information, we advise not writing it down anywhere but instead reliably knowing it by heart.
Tip No. 3: Know exactly where your money goes.
As we’ve mentioned many times before, proper budgeting is the key to good financial habits. As a primary account holder, you are responsible for every dollar of your balance, down to the last cent.
This responsibility requires more than just knowing how much you should be spending and saving. Competent budgeting includes a detailed understanding of how much you actually are spending and saving and knowing how to adjust your behavior accordingly. It also involves revisiting your personal spending plan regularly to assess when you need to make these adjustments.
Tip No. 4: Prioritize keeping debt to an absolute minimum.
There are several ways to minimize debts. Firstly, be wary of afterpay or charging too much—or too often—to your credit cards. Consistently charging minuscule amounts adds up quicker than you think.
Second of all, take caution when investing in depreciating assets, such as cars or computers, because these possessions quickly lose value. For example, a brand-new car loses 20 percent of its value in the first year of ownership and only retains about 40 percent of its original value after five years. For this reason, young adults looking to successfully build wealth should only make significant purchases such as these if they’re absolutely necessary.
Lastly, understand the impact of taking out loans before signing on the dotted line.
Tip No. 5: Open an account that does the work for you.
Research various account types and what they offer to make sure you’re working with a financial institution that gives something back. One excellent way to start your savings journey is by opening the right savings account with an institution you can trust.
Key Takeaways: Benefits of Better Banking
With so much to think about when it comes to your financial future, we know you might be overwhelmed. Setting yourself up for success means fully understanding the implications of spending, saving, and borrowing by brushing up on your financial literacy.
Luckily, FSCB’s resources allow you to make smart financial decisions as you advance through your career and build a life for yourself.
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