Checking and Savings 101

Life, Money and Gratitude #7 Checking and Savings 101

Bank Account

The Dirt Trader

Modern day banking, a modern day wonder. Let's imagine doing transactions through barter or trade, let's say I want some paper, but all I have is dirt. Who do I trade dirt with to get something that the person who has paper wants? Hmmm? There has to be a better way. Then came gold and silver, gold and silver have a certain value by weight, now I can use one ounce of silver to buy the paper that I want. This works for small in person transactions but what about large transactions or what if I want to buy a shirt from a store in China? Do I mail my silver coins to the store in China? I think not. How about if I’m a grocery supply company that ordered twenty shipping containers of bananas from South America, do I send bars of gold to the banana company? NO, NO, NO, This is where banking comes into play, you have a checking account or a savings account that you can transact with. Now there is a system, as imperfect as it is, to move value around. I can now take my fiat currency (money) and deposit it into my bank account, the bank will take control of my money and gives me an IOU. I can then use the money in “my” account to make transactions. In exchange for the bank taking custody of my money to lend out to others, it has agreements with local banks as well as foreign banks to shift money from one account to another. This, in effect gives you the ability to buy things from anywhere in the world. Add a debit card and a credit card and modern day banking truly is a modern wonder. Just remember, banks charge for everything and as long as there is no banking crisis the system works pretty well.

All Smiles

It’s the fall of 1990 and I’m a freshman in college and I have my first experience with banking. Mind you, no one has given me any instruction about banks, what they do, how they work, I don’t know anything. It’s a bit of a head scratcher, you’d think someone would have clued me in to what a bank is, but, no. So I come down the stairs from the dinning hall and there is this table set up with all these smiling people handing out swag, pens, sponge balls, and calendars. I think to myself, boy that’s real nice these people are just giving away free stuff, I’ll just shuffle over there and get some goodies.

The nice people start asking me questions,

“How was dinner?”,

“How’s school going so far?”

“You looking forward to the weekend?”

All smiles. I’m like Wow, these folks are nice.

Then, one of them smiles at me and hands me a clipboard and says “we can help you get a bank account and a credit card” I smile back and say “thank you, that’d be nice”.

Welcome to banking, I am armed with a new bank account and a credit card.

I have no idea how to use them!

This probably isn’t going to go so well, but we’ll get into that in a later issue.