Banking

Storing your money correctly

Managing your money wisely starts with knowing how to store it properly. Think of your money as a rare, collectible pair of sneakers. Would you toss them into a messy, dusty corner? Of course not! You’d keep them in a safe, well-organized spot to ensure they stay in pristine condition and ready for use. That’s exactly how banking works - choosing the right bank and account is like finding the perfect storage unit for your sneakers.

But it's a bit more complicated: some banks don’t just protect your money, they can actually help it grow. Imagine a sneaker box that not only keeps your shoes safe but also magically adds new pairs over time! Banking can do the same for your wealth if you pick the right account.

To make the most of it, you need to choose the right type of account based on your needs. Let’s take a closer look at two popular options: checking accounts and savings accounts.

Checking accounts

A checking account is your everyday hub for money. It’s designed for convenience, making it a must-have for managing daily life. Linked to a debit card, it lets you make purchases, withdraw cash, and pay bills quickly and easily. Almost every person has a checking account, since without one spending money becomes a hassle.

That being said, checking accounts are built only as a way to store your money. They usually don’t offer perks like earning interest - they’re more about handling transactions smoothly. Most people keep amounts ranging from a few hundred to a few thousand BGN in their checking account, depending on their preferences.

Savings accounts are built for long-term financial growth, making them an excellent choice for safely storing money you don’t plan to spend regularly. Unlike checking accounts, savings accounts typically don’t come with a debit card, so they’re not suited for day-to-day transactions. Instead, they’re perfect for keeping funds you want to grow over time.

The key to a savings account’s growth is APY (Annual Percentage Yield), which is the rate the bank uses to add money to your account each year. Here’s how it works:

If your savings account offers 1% APY and you deposit $100, you’ll earn $1 after a year, making your total $101. While this may seem small, the power of savings becomes clear with bigger balances. Imagine having $100,000 in your account at the same 1% APY - you’d earn $1,000 in just a year, all without any extra effort!

APY in different regions

APY rates can vary widely based on factors like where you live, the bank you choose, and the specific account type. For example, in Bulgaria, typical APY rates for savings accounts range from 0.1% to 0.5%, which is relatively modest compared to the United States, where the average APY is around 0.45%.

You might have heard of online banks, also known as fintech banks, which often advertise high-yield accounts with APY rates as high as 5%. These offers can be tempting, but there’s something that should be know before signing up for one. Many fintech banks use these attractive rates to attract customers but may apply high fees later. Additionally, these banks might not be the best option for storing large amounts of money, as they often lack the protection and deposit guarantees of traditional banks.

Choosing the right bank

When choosing a bank to store your money in make sure that it is:

Secure and reliable

Look for a bank with a strong reputation for security and customer trust. Make sure the bank is insured by a recognized deposit insurance fund.

Convenient and Accessible

Choose a bank with a user-friendly online banking system, plenty of ATMs, and accessible branch locations. Having the ability to manage your money anytime and anywhere is crucial for modern banking.

Transparent and Affordable

Select a bank that clearly explains its fees, terms, and conditions. Watch out for hidden charges, like maintenance fees or ATM withdrawal costs, and compare interest rates to ensure you're getting the best deal for your needs.