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Welcome to Foundations of Money Management
Foundational basics in banking to help build your financial education.
Explore 3 different areas of how banking works and can help you manage your finances
Section 1: Banking Basics
Understanding Banks, Accounts and ATMs
What Is a Bank?
A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services, such as provide money management tools, currency exchange, and safe deposit boxes.
With a bank account, you can deposit money into the bank for safekeeping and take your money out when you need it.
Is My Money Safe in a Bank?
Yes! Currently, deposits of up to $250,000 are insured by the Federal Deposit Insurance Corporation (FDIC) per depositor and per account type. This means that if your bank were to go out of business, the FDIC would return your money up to the insured amount. It’s certainly safer than keeping it under your mattress!
What Are the Advantages of Banking?
Keeps your money safe: Money in a bank account is insured up to the maximum allowed by law.
Makes managing your money easier: With a bank account, you can use Automatic Teller Machines (ATMs), bank online or through your mobile device, have your paychecks deposited directly into your account, pay bills online and make purchases.
Helps you track your money: You can check your current balance and the transactions you’ve made. Most banks allow you to view this information online or on your mobile device, but you can also request a monthly paper statement (a fee may apply).
Provides cost-effective options for managing your money: With a checking account, you will have a variety of options for making payments – including personal checks, cashier’s checks and debit card transactions – eliminating the need for costly money orders.
Helps you set money aside for the future: By making regular deposits into a savings account (adding money to your account), you can save money securely to pay for things you’ll need later.
What Do I Need to Open a Bank Account?
To open a checking account, bring all of the following to the bank:
- Your valid state issued driver’s license, a state-issued ID, or a government-issued ID (for example a Passport or Military ID) with an ID number and the country that issued it. The ID cannot be expired.
- A valid photo ID, which could include one of the forms of identification referenced above, the Matricula Consular card, or the Permanent Resident Card (Green Card).
- Your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
- An amount of money to deposit. Talk to the banker to find out the minimum amount you need to open an account.
What Happens When I Open a Bank Account?
When you open an account at your bank, you will usually receive:
- Account Agreement: Provides key information such as your rights and responsibilities.
- Fee Schedule: States the fees for various products and services, like overdraft fees, ATM fees, or the minimum balance requirements to avoid a service charge. Many fees only apply if you choose to use a specific service. Talk to your banker to learn more and to make sure you understand all fees associated with your account.
- Debit Card (for checking account products): Enables you to use an ATM (automated teller machine) or make purchases at stores or online. This is optional and typically offered at no cost. You may pay fees for using some ATMs. Those fees will be disclosed on the fee schedule.
- Transaction Register: Helps you keep track of the money you put into and take out of your checking account. You can also keep track of your current balance, deposits and payments through online banking and your mobile device.
Important Things to Know About Your Account
These important Regulatory Disclosures are typically found in your account agreement and describe policies related to your account:
- Funds Availability: The availability of deposit funds is regulated by federal law. When you open an account, ask for the bank’s policy on when deposited funds are made available for you to use. For new accounts open for less than 30 days, banks can hold funds for a longer period than stated in their general policy.
- Electronic Funds Transfer (EFT) Disclosure Statement: A regulatory disclosure that informs you of your rights, liabilities and responsibilities if you currently, or in the future, use any of the EFT services available through your institution, such as debit card transactions, online transfers, and others. The agreement also advises you of your rights, liabilities and responsibilities in case of errors, discrepancies, or questions regarding EFTs on your account, such as ATM transactions, online transactions, and debit card transactions.
- Privacy Policy: This explains what personal information banks collect, why they collect it, how they protect it, and how and why in certain cases they may share it among their affiliate companies or with select other parties. The Privacy Policy also tells you how to exercise your personal information sharing and use choices.
ATMs Are a Convenient Way to Bank
When you open an account, most banks will issue you a debit card. At most ATMs, you can take out, deposit or transfer money, and check your account balance.
Most are available 24 hours a day, 7 days a week, ATMs are a good way for busy people to bank. Your account may have a daily limit on how much you can withdraw from an ATM.
Tips & Tools: Using an ATM
ATMs are easy to use!
- Insert your debit card and follow the instructions on the machine.
- At the prompt, enter your PIN (personal identification number). Typically, this is a 4-digit code you selected at the time the debit card was issued.
- Follow the prompts to deposit cash, make a withdrawal, or view your balance.
- Don’t worry if you make a mistake before completing the transaction, just press “Cancel” to start over.
More About ATMs
ATMs are convenient, but here are a few things you should know:
- Keep your PIN safe! Select a PIN that you can remember and never share it with anyone else. Avoid common or predictable combinations, such as 1-2-3-4 or your birthday.
- The balance displayed on the ATM screen or receipt may not accurately reflect how much money you have available to spend. This is because recent purchases or other payments made with your debit card may still be pending. Also, any checks you’ve written may not have been cashed yet by the recipient.
- Funds from checks deposited in an ATM may not be available immediately. This is because your bank may wait to make sure that the person or company who issued the check has the money in their account before releasing the money to you. Review the Funds Availability disclosure to better understand how your bank will make these funds available to you.
Don’t Forget to Review Your Monthly Statements
Your bank statement shows the deposits and withdrawals made to your account, usually for a one-month period. You can view your monthly statement online or opt to receive paper statements (a fee may apply). Review each deposit, payment, or withdrawal to ensure you are familiar with them all.
Responsible Choices Lead to Long-Term Financial Security
Opening a bank account is one of the first steps in building a strong financial future. It’s important to keep your account in good standing. Always make sure your account has enough money for paying your bills, as well as keep working towards your savings goals.
Know Your Account Balance: If you don’t know how much money is in your account, you may try to spend more money than you have. This can result in costly overdraft fees (when your account balance is not enough to cover a withdrawal or debit), returned check fees (if you write a check and don’t have enough money to cover it), or the inconvenience of having a debit card purchase denied in a store or online.
Know When Funds Are Withdrawn: When using a prepaid or debit card for a purchase, the money usually comes out of your account right away. In addition, a merchant can place a “hold” for more than the purchase price for certain transactions – such as pay-at-the-pump gas purchases and hotel or rental car bookings – to cover potential damages or extra days of use. Once the transaction is completed, the hold is lifted.
These holds are temporary, but they do lower your account balance and may affect your ability to make other payments.
- What is a Bank
- What are the advantages of banking
- What Do I Need to Open a Bank Account?
- What Happens When I Open a Bank Account?
- Important Things to Know About Your Account
- ATMs Are a Convenient Way to Bank
- More About ATMs
- Responsible Choices Lead to Long-Term Financial Security
Section 2: Budgeting and Beyond
Getting Organized and Planning for the Future
What is a Budget and Who Needs One?
Think of a budget as a written spending plan for a fixed time period showing how much money you expect to have coming into your household and how you expect to use it.
Who Needs a Budget?
Whether you have a lot or just a little, a budget can help anyone better manage their money.
A good budget can help you:
Reduce your worry about not having enough cash when bills are due.
Understand where your money is going and how to make appropriate spending choices for you and your family.
Better manage your money so you can meet day-to-day expenses, as well as save for long-term needs.
Provide a cushion for unexpected expenses such as a car breakdown or visit to the doctor.
Reasons to Make a Budget
Sometimes people think they don’t have time to make a budget or feel they’re too far behind for a budget to help. Despite these beliefs, a realistic budget can help you:
Gain control of your finances: A budget can help you ensure you have money for your needs - everyday expenses and other obligations - as well as help you make better decisions about what you can afford, such as going out to a restaurant.
Get and stay organized: A budget shows you your past spending so you can better plan you future spending.
Get your family to work together towards a financial goal: Creating and managing a family budget together lets you talk about money matters and work together towards shared goals. Even if your kids don't make financial decisions, including them in your planning can help them start learning about good money management habits.
Reduce or avoid debt: With careful budget planning, you may find ways to reduce some expenses and increase your payments towards any monthly credit card or loan payments. This can help reduce the overall amount of interest you'll pay. Controlling spending can also help you avoid new debt.
Save money: By reducing unnecessary expenses and living within your budget, you may be able to free up money for a future unexpected need or even a vacation.
Developing a Budget: Do Your Research
Identify every source of income
The first step in budgeting is to identify where your money comes from and how you spend it. There are more sources of income than a weekly paycheck. Be sure to think of all of them:
- Wages and salary
- Bonuses, commissions, tips
- Government benefits
- Worker's compensation
- Unemployment compensations
- Disability benefits
- Pensions or annuities
- Social Security benefits
- Alimony and child support
- Tax refunds
- Scholarships or fellowships
- Interest and dividends
Now think about your necessary expenses
This is money spent on the things you need, which are called non-discretionary expenses.
- Rent or mortgage
- Utilities (electricity, phone, etc.)
- Food
- Clothing
- Insurance
- Child care or tuition
- Transportation (to work, doctor appointments, etc.)
You may also have optional expenses
This is money spent for things you want, which are called discretionary expenses.
- Restaurants
- Clothing for occasional, special items
- Entertainment
- Gifts and contributions
- Travel for vacations, road trips, family visits
- Personal care like haircuts and visits to a nail salon
Tips & Tools: Track Your Expenses
Next, identify all your day-to-day expenses. To do this, carry a small notebook or use a mobile device to list every expense – what you bought, how much you paid, and how you paid for it – over a period of two weeks or more to be sure you have a complete list.
Once you’ve identified your needs and wants, your routine monthly payments, and day-to-day spending habits, it is time to develop your budget.
Table 1: Expense Tracker
| Description | Amount | Payment Type |
|---|---|---|
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ | ||
| $ |
Developing a Budget: Make Your Plan
Planning gives you more control over your spending. You can develop a budget based on an entire month, for a week, or for two weeks.
- Establish categories for your expenses based on your past spending patterns.
- Set estimated targets for how much you would like to spend in each category by the week or month.
- Decide whether you can – or would like to – pay more or less in each category.
Table 2: Paycheck Planner
| Every Pay Expenses | Amount | Due Date | Estimated Expense | Actual Expense | Difference | Estimated Expense | Actual Expense | Difference |
|---|---|---|---|---|---|---|---|---|
| Subtotal: |
Developing a Budget: Track Your Progress
Planning gives you more control over your spending. You’ll need to track your income and which expenses you pay when.
Tips & Tools: Using a Paycheck Planner
You can use a paycheck planning document to help you track your pay dates and determine which expenses will be paid with each paycheck.
Consider planning your budget for a few months in advance and refer to it every time you are paid, to remind you of your plan and ensure you are on track.
How to Use a Paycheck Planner
Use your paycheck planner to:
List your expected sources of income by date.
Fill in planned expenses (for example, food and transportation) and how often you need to pay for them.
Set estimated amounts for paying each of your expenses.
Tips & Tools: Budget Tracking Tips
Use these tips to keep your budget on track:
“Pay yourself first” by setting aside a regular savings contribution – no matter how small – from every paycheck or at least once a month.
Avoid late fees on bill payments by ensuring your payments arrive before their due dates to allow for processing time.
For pay periods when there is more income than your estimated expenses, consider putting the extra money into a savings account. This money can be used to cover your needs if you have an unplanned expense.
Developing a Budget: Evaluate and Adjust
Once you’ve tracked your income and expenses, you’ll need to evaluate how you’re doing in balancing the two. You can use the Paycheck Planner to see how you did!
Subtract the Actual Expenses from the Estimated Expenses.
Note the amount underspent or overspent in the Difference column.
For each Expense category, complete the Difference column.
Look for areas where expenses could be reduced or where you need to increase your spending amounts.
Tips & Tools: Reducing Expenses
By using a budget, most people can gain more control over their money, reduce their expenses, and save money.
Here are some ideas for reducing common expenses.
Utilities:
Gas or oil. Reduce heating bills with a programmable thermostat.
Electricity. Conserve energy by turning off lights and other appliances not in use.
Water. Use less by replacing fixtures that may have leaks or choose low-flow options. Periodic maintenance may cost you money now but could save you more money over time.
Phone. Cancel services you don’t need. Select the least expensive data plan and use secured Wi-Fi whenever possible.
Cable & Internet. Consider if streaming video and TV services will meet your needs and might be less expensive than Cable TV.
Food:
Stock up on items on sale. Tailor your meal planning around food choices that are in season. Use store brands whenever possible.
Transportation or gas:
Get a monthly or weekly public transit pass instead of a daily one. Use ride-sharing services sparingly and only when less expensive alternatives are not available.
Car maintenance:
Take your car in for regular maintenance, which can prevent more severe problems. Plan several months ahead for periodic expenses, such as oil changes or other scheduled maintenance, so you’re less likely to have surprise expenses.
Education:
Check if your employer offers a tuition assistance program. If you pay tuition for any children, check with the school about any scholarships or grants that might be available.
Personal expenses:
Consider shopping for clothes at less expensive stores or wait for an item to go on sale. You may want to save on restaurant expenses by eating out only on special occasions. Renting or streaming movies instead of going out to the theater is another idea to consider.
Monthly subscriptions:
Opt for free services; they may include ads but are generally cheaper than streaming services. If paying for streaming services, limit subscriptions to services that do not have a free option.
- What is a Budget and Who Needs One?
- Reasons to Make a Budget
- Developing a Budget: Do Your Research
- Tips & Tools: Track Your Experiences
- Developing a Budget: Make Your Plan
- Developing a Budget: Track Your Progress
- Tips & Tools: Budget Tracking Tips
- Developing a Budget: Evaluate and Adjust
- Tips & Tools: Reducing Expenses
Congratulations!
You've successfully completed the Foundations of Money Management course. We hope you will put what you’ve learned into practice by using the templates and resources we’ve developed to help you create and manage your own budget.
Download the printable Expense Tracker and Monthly Budget Worksheet templates.
Learn and explore personal finance, financial wellness and much more at PNC Insights.
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