ShmoopTube

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We speak student!

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Personal Finance 101

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Checking Account versus Savings Account

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a la Shmoop

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Let's bring it back to some practical advice for students.

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So is your advice to kind of totally bypass

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the checking account and just invest it?

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Well, it depends.

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So you need a checking account.

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You have to pay your bills somehow.

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[ squawk ]

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The question is how much you need to keep in a checking account.

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And historically, keeping a lot of money in a checking account is really inefficient.

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[ say what?! ]

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And you just put it in the minimum that you need to pay off your bills.

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And everything else, generally speaking, you probably want to invest.

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And, yes, there's risk in the stock market,

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[ manic giggle ]

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but over the last 127 years,

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the market's gone up on average ten percent a year.

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So, yeah, it may go down

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25 percent in a year,

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but you're 16. Who cares?

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It's gonna come back and you keep investing,

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and if you're disciplined and you invest every month,

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when the market's sold off

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and you're still investing your hundred bucks a month,

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you've bought a lot more shares for that hundred bucks

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than you did when the market was expensive.

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And then when it comes back, boy, you've made a killing.

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[ woo-hoo! ]

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[ whoop ]

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Should I bypass a checking account and just invest my money?

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[ manic giggle ]

Full Transcript