Deposits:UnderstandingtheBasics
WhatAreDeposits?
Depositsrefertothesumofmoneythatiskeptinanaccountwithafinancialinstitutionsuchasabank,creditunionorbrokerage.Theycanbemadebyindividuals,businessesororganizationsandserveasawayofstoringfundswiththeintentionofusingthematalaterdate.Depositscomeindifferentformssuchassavingsaccounts,checkingaccounts,timedepositsandcertificatesofdeposit.
TypesofDeposits
Thereareseveraltypesofdepositsthatindividualsandbusinessescankeepinabank.Oneofthemostcommontypesofdepositischeckingaccounts.Theseaccountsallowpeopletoaccesstheirmoneyeasilythroughchecks,debitcards,andonlinebankingsystems.Theyusuallydonotearninterestorearnverylittle.Savingsaccounts,ontheotherhand,aredesignedforlong-termsavingswiththeprimaryaimofearninginterest.Theyusuallyhaverestrictionssuchaslimitedchecksorwithdrawalseachmonth.Timedeposits,orcertificatesofdeposit(CDs),allowsaverstodepositmoneyforafixedperiod,fromonemonthtofiveyears,andearnhigherinterestrates.Oncethefixedperiodends,thedepositorcaneitherwithdrawthefundsorrollthemovertoanothertermdeposit.
WhyDepositMoney?
Depositingmoneyisanecessarypartofpersonalandbusinessfinance.Therearemanyreasonswhypeoplechoosetodepositmoneyintoabankaccountinsteadofkeepingitelsewhere.Firstly,itismuchsafertokeepmoneyinabankaccountthanathome.BanksareinsuredbytheFederalDepositInsuranceCorporation(FDIC)intheUnitedStates,andtheCanadaDepositInsuranceCorporation(CDIC)inCanada.Thisprovidesaguaranteeofuptoacertainamountforeveryeligibledepositaccount.Secondly,depositingmoneyinabankaccountmakesiteasiertomanagepersonalfinance.Keepingtrackofexpensesandincomeissimplerwhentransactionsaremadethroughabankaccount.Lastly,havingmoneyinabankaccountallowsforeasyaccesstocredit,suchasloansandcreditcards.Lendersgenerallyrequireproofofincomeandassetsbeforeapprovingcredits,andhavingtheseassetsdepositedinanaccountmakestheprocesssmootherandfaster.Inconclusion,depositsareanessentialpartofpersonalandbusinessfinance.Theyprovideasafeandeasywaytostorefundswhileearninginterest.Therearevarioustypesofdepositsthatpeoplecanchoosefromdependingontheirfinancialgoalsandneeds.Depositingmoneyinabankaccountisnotonlynecessarybuthasmanyadvantagesthatmakemanagingmoneysimpler.
