If you rely on family members for help with your day to day finances, it’s possible you also rely on using a family member’s bank account for storing your money. While having someone else have control over your finances might seem to make your life easier, there are some important benefits to having your own bank account. These reasons include employment, cashing cheques, reputation, safety and accessibility. Each of these reasons is explained in more detail below.
Employment – Direct Deposit
Direct Deposit means that you give permission for a person, company, or organization to deposit money into your bank account. Examples of the uses for direct deposits include: Government Benefits such as the Ontario Disability Support Program, pay cheques, and tax refunds. Direct Deposits are very convenient, as it saves you time from going into the bank, or visiting a bank machine in order to cash a cheque.
In some cases Direct Deposits are required and there are no other options. This is true particularly when you get or have a job. If you plan to find work it is important to set up a bank account so that you can immediately begin receiving your pay. Using another person’s bank account is not an option, even if it is a family member’s account. The account holders name MUST match up with the name of the person who is receiving the money. Therefore, a person who is going to be receiving direct deposits will have to have a bank account of their own.
Sometimes it is not possible to use a direct deposit . When this is not possible, it is likely you will receive a physical cheque instead. If you have your own bank account, you will be able to deposit the cheque and then take the money out. If you do not have your own account, and you need your money right away, you will be forced to go to a cash advance company (e.g. Money Mart). A cash advance company will loan you the money until they get the money from your bank account. They will charge you a fee to do this. Using a cash advance company means that you will lose a large portion of your money to pay for the convenience of having your cheque cashed quickly. Your bank, on the other hand, will allow you to keep more of your money.
Creating a budget that works for you
When you have your own bank account you have access to your money when you need it. Yet, sometimes people have difficulty managing their money. If you have trouble with budgeting, there are many options that will allow for you to control your money better. Some of these options include:
- Pre-authorized payment planning. Pre-authorized payment means that you give your permission in advance for money to be taken out of your account to pay a bill. This can be used for your rent or cable bill.
- Having a second trusted person with access to the account
- Setting daily withdrawal limits. By setting a limit on how much you can take out each day, you can reduce the chance that you will spend more money than you have to spend.
These options are only available if you have your own account.
Establishing a good reputation with your bank is very important. What is meant by “a good reputation “is that you do not spend too much money if you do not have it. It also means that if you need to borrow money from a bank or any other institution, you have shown you can pay that money back. It also means that you have shown you can pay your bills and expenses on time. Once the bank has seen you can manage your money responsibly, they will allow you greater banking freedoms and privileges. For example, the bank will be more likely to allow immediate access to your money through cheques, and allow you access to other services such as advice on Registered Disability Savings Plans or applying for a loan.
A Registered Disability Savings Plan allows you to save money for the future and at the same time reduce the amount of income tax you pay today.
A loan is a sum of money that banks will give to you to use for a certain period of time. A loan has to be paid back within an agreed to period of time and you will need to pay a fee for the use of this money, referred to as “interest”.
You might not think that this will affect you now, but you do not know what the future has in store for you. It is better to develop a good reputation now, so that you have the option of using these services at a later date.
Accessibility and Safety
Having your own bank account also means you can access your money from multiple locations, without having to carry a lot of cash. As technology gets better, the use of electronic banking machines and computers to do banking and buying is becoming more common. Having your own bank account allows any time access to your money through ATM machines or through Point of Sale machines (e.g. Interac). Having your own bank account means that you will not have to carry a lot of cash; as a result it is less likely your money will get lost or stolen.