How to Balance a Checking or Savings Account

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  • 0:02 Defining Checking and Savings
  • 0:43 How to Balance Your Account
  • 3:20 Problems
  • 4:54 Lesson Summary
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Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and a PhD in Higher Education Administration.

Hopefully you keep your money at a bank or credit union and not under your mattress! In this lesson, you'll learn how to manage your account and keep track of those hard-earned dollars.

Defining Checking and Savings

This lesson is going to discuss how to balance a checking or savings account, but before we get into the details, let's make sure we agree on definitions. A checking account is a financial account through a bank or financial institution that you can put money in and then access by withdrawing money, writing checks, or using a debit card tied to that account.

A savings account is similar, but generally, you access that money less frequently. You probably don't have checks for it, but you can link your debit card to that account and withdraw from it. An important part of either account is that they can earn interest - the bank will pay you for having your money in a savings account and sometimes in a checking account.

How to Balance Your Account

Now that we know the definitions for each type of account, balancing your account is just a matter of comparing your records with your banks' records and figuring out if there are differences and if there are, why they're there.

Let's look at an example. We'll say this is an interest-bearing checking account so that everything we say here applies to a savings account, just maybe at a less frequent rate.

To begin, you'll need two documents: your financial records and a current copy of your bank account statement. For our example here, let's say the bank statement says you have $1,367.38, and your records say you have $1,233.87.

Now, you'll calculate the difference between the bank statement and your records, which is $133.51. This could be because maybe…just maybe…you wrote a check this morning for $133.51. You would just need to account for that check the bank hasn't seen yet. But, for this example, let's not make it so easy. Balancing the account now becomes finding that $133.51 difference.

Compare transactions, starting with the most recent, to see if there are any that don't match. When you find them, make the appropriate adjustment to either the bank statement or your accounts. The first thing you see is that yesterday you wrote a check for $150. It usually takes a few days for a check to show up on a bank statement, and you don't see it on the statement, so you subtract that $150 from the bank statement. That brings it down to $1,217.38, compared to your $1,233.87.

Well now your records say you have $16.49 more than the bank! So what are you missing? Lucky for you, it's an easy find - $16.58 at Walmart that the bank has but you don't, although you do remember the transaction. Better add that one to your list. Now you have $1,217.29 and the bank has $1,217.38. The bank is now showing you have .09 more than you say you have. Does this never end???

As you keep looking, line by line, you see a small interest payment from the bank to you for .09. Of course, you won't know about the interest until the bank tells you, so there's the last piece of the puzzle. Add that to your records by adding .09, and you're at $1,217.38. Accounts balanced. Great job!

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