Guide to finance
Thursday 1 January 2004
Banking is one of the simplest parts of finance, but it is also one of the most important.
Bank accounts
If you work for a living, it's highly likely that your employer will pay all wages directly into each employee's bank account.
When it comes to paying bills or doing your shopping, it's likely that you'll need to pay using a cheque or debit card, instead of carrying around heaps of cash.
Question time
When choosing what type of account to open, you should take a note of your spending habits to help establish your needs. Some questions you might ask yourself include:
- Do you need an account with just a basic cash card that lets you take out money from a cash machine in the high street?
- Do you need a debit card that lets you pay for things in shops without the need for cash?
- Will you need an overdraft, which lets you borrow money on your account when you're a bit short?
- Would you like to manage your finances with someone face to face in a high street bank or would you prefer the convenience of banking over the phone or the internet?
Opening an account
People below the age of 16 can open bank accounts. They will receive a cash card which can be used at cash machines in the high street (sometimes called ATMs). When you get your card, you will be given a four-digit PIN number, which must be kept secret.
Whenever dealing with banks or building societies, it's worth remembering that many are covered by the Banking Code, which sets out minimum levels of service your bank or building society has promised to provide.
Banks and Building Societies that have signed up to the Code must have a straightforward complaints system in place and be part of the Ombudsman scheme, which allows customers to have their complaints investigated by an independent body outside the bank.
Insurance
People take out insurance to protect themselves from mishaps, accidents or the unexpected.
There are lots of different types of insurance and virtually anything can be insured, depending on the level of risk.
Types of insurance
High value possessions such as vehicles or items in the home can be insured. As well as insuring your health, you can even insure your income and get protection against unexpectedly losing your job because of redundancy.
When people buy their own flat or house, mortgage lenders stipulate that the new owners of the property must have buildings insurance, which is also known as 'bricks and mortar' insurance. Protecting the mortgage lenders investment as well as yours, this makes sure that the property can be rebuilt if something should happen and it is severely damaged.
Choosing an insurer
You can look for insurance yourself by getting in touch with various insurance companies direct or you can ask an insurance broker to do it on your behalf.
One of the biggest deciding factors in choosing one insurance company's cover over another is the cost of the monthly premiums. These are the monthly payments you pay an insurer.
The insurance company then puts everyone's premium payments into one larger fund, which is then used to pay out large amounts of compensation as and when the unexpected does happen.
When applying for insurance of any kind, you should always read the fine print and find out what is and what is not covered by the insurance. For more information, take a look at our useful links.
