Understanding Bank Accounts & Account Statements

Section 1: Introduction

Managing money is an important skill that everyone needs. One of the best ways to keep money safe and organized is by using a bank account. Banks and credit unions offer different types of accounts to help people save, spend, and manage their money wisely.

This handout will help you:
✅ Understand different types of bank accounts and what they are used for.
✅ Read and understand a bank account statement, which shows all the transactions (deposits, withdrawals, and payments) made in an account.
✅ Manage your bank account wisely to avoid extra fees and keep your money safe.

Why Do People Use Bank Accounts?

Many people keep their money in a bank instead of carrying cash. Here’s why:

🔹 Safety: Money in a bank is protected. If cash is lost or stolen, it’s gone forever. But banks keep money secure and insured.

🔹 Convenience: A bank account lets people deposit paycheques, pay bills, and buy things online or in stores without needing cash.

🔹 Saving & Earning Interest: Some accounts help people save money by paying interest, which is extra money the bank gives for keeping money in the account.

🔹 Keeping Track of Money: Bank accounts record all transactions. This helps people know how much they have, where they spent money, and how to plan their budget.

How Banks and Credit Unions Work

Banks and credit unions are financial institutions that help people manage money.

🏦 Banks – These are businesses that offer financial services like bank accounts, loans, and credit cards. They are usually big companies that operate across the country. Examples include RBC, TD, Scotiabank, and CIBC.

🏛️ Credit Unions – These are member-owned financial institutions. People who open accounts become members, and profits go back to them through lower fees and better interest rates. Examples include Vancity, Meridian, and Coast Capital.

Both banks and credit unions offer similar services, but credit unions may have fewer locations and better customer service because they focus on their members.

What Will You Learn in This Handout?

This handout will teach you how to:
📌 Choose the right type of bank account based on your needs.
📌 Read an account statement to understand where your money is going.
📌 Manage your account wisely to avoid unnecessary fees and problems.

Understanding how bank accounts work is an important life skill. Whether you're opening your first account or trying to manage money better, this guide will help you make smart financial choices.

Section 2: Types of Bank Accounts

There are different types of bank accounts, each designed for different needs. Some accounts are best for daily spending, while others help with saving money over time. Choosing the right account can help you avoid extra fees, manage money better, and even earn extra cash through interest.

This section will explain the most common types of bank accounts, their features, and things to watch out for.

1. Chequing Accounts: Everyday Spending

🔹 Best for: Daily transactions like paying for groceries, shopping, and paying bills.
🔹 Key Features:

Comes with a debit card for in-store and online purchases.
Allows unlimited or limited transactions depending on the plan.
Can be used for direct deposit (e.g., getting your paycheque).
Supports automatic bill payments and e-Transfers.

⚠️ Things to Watch Out For:
❌ Some chequing accounts have monthly fees (e.g., $4 to $16 per month).
❌ Overdraft fees apply if you spend more money than you have in the account.
❌ Some banks charge for extra transactions beyond a set limit.

✅ Example: Sara gets her paycheque deposited into her chequing account every two weeks. She uses her debit card to buy groceries and pay her phone bill.

2. Savings Accounts: Growing Your Money

🔹 Best for: Storing money for the future and earning interest.
🔹 Key Features:

Pays interest (extra money) for keeping money in the account.
Encourages saving by limiting the number of withdrawals.
Helps people set aside money for emergencies, vacations, or big purchases.

⚠️ Things to Watch Out For:
❌ Lower interest rates than investment accounts.
❌ Limited withdrawals (some banks charge fees if you take money out too often).
❌ Not ideal for everyday spending.

✅ Example: David wants to save for a new laptop. He puts $50 into his savings account every month, earning a small amount of interest over time.

3. Student Accounts: Banking for Young People

🔹 Best for: High school and college/university students who want a low-cost account.
🔹 Key Features:

No or low monthly fees for students.
Often includes free e-Transfers and unlimited transactions.
Some banks offer discounts or perks (e.g., discounts on transit passes).

⚠️ Things to Watch Out For:
❌ Many student accounts convert to regular chequing accounts after graduation, which may come with fees.
❌ Limited to people under a certain age (usually 18-25).

✅ Example: Mia is a university student who gets a student chequing account with free unlimited transactions. She uses it for buying textbooks and paying for coffee.

4. Joint Accounts: Sharing Money

🔹 Best for: Couples, family members, or business partners who want to share an account.
🔹 Key Features:

Multiple people can deposit and withdraw money.
Helps families or partners manage shared expenses like rent, groceries, or utilities.
Useful for parents helping their kids manage money.

⚠️ Things to Watch Out For:
❌ All account holders have equal access, meaning anyone can withdraw money.
❌ Requires trust, as one person could misuse the funds.
❌ If the account is overdrawn, all account holders are responsible for paying the debt.

✅ Example: Jake and Lisa are roommates. They open a joint account to pay rent and internet bills together.

5. Tax-Free Savings Account (TFSA): Long-Term Saving & Investing

🔹 Best for: People who want to save or invest money without paying taxes on their earnings.
🔹 Key Features:

Tax-free growth – any interest or investment earnings are not taxed.
Flexible – money can be withdrawn at any time without penalty.
Can be used for saving or investing in stocks, bonds, or mutual funds.

⚠️ Things to Watch Out For:
❌ Contribution limits – There is a yearly maximum you can deposit (e.g., $7,000 per year in 2024).
❌ Not ideal for daily spending – Works better for long-term saving and investment.

✅ Example: Priya puts $2,000 into her TFSA. Over time, it grows to $2,500, and she doesn’t have to pay tax on the extra $500.

Choosing the Right Account

Before opening a bank account, it’s important to consider:
✅ How will you use the account? – For daily spending, saving, or both?
✅ What are the fees? – Some accounts charge monthly fees, while others are free.
✅ What benefits do you need? – Unlimited transactions, free e-Transfers, or high interest?
✅ Are you eligible? – Some accounts (like student accounts) require proof of status.

Section 3: How to Read an Account Statement

A bank account statement is a document that shows the money coming into and going out of an account during a certain period. It helps people track their spending, deposits, and balance, making it an important financial tool.

This section will explain:
✅ What an account statement is and why it matters.
✅ How to read the key parts of a statement.
✅ How to use a statement to manage money wisely.

1. What Is an Account Statement?

A bank account statement is a summary of all transactions in a bank account over a specific period, usually one month. It includes:

Deposits – Money added to the account (e.g., paycheques, transfers).
Withdrawals – Money taken out (e.g., debit purchases, ATM withdrawals, bill payments).
Balance – The total amount of money in the account after each transaction.

People should review their statements carefully each month to:
🔹 Check for mistakes or unauthorized charges.
🔹 Make sure they have enough money to cover their expenses.
🔹 Understand their spending habits and improve budgeting.

2. Key Parts of an Account Statement

A typical account statement includes:

A. Account Information

🔹 Bank name & contact details – The financial institution that issued the statement.
🔹 Account holder’s name & address – The person who owns the account.
🔹 Account type – Whether it’s a chequing or savings account.
🔹 Statement period – The dates the statement covers.

B. Summary Section

This part provides a quick overview of the account activity. It usually includes:
🔹 Opening balance – The amount of money in the account at the start of the statement period.
🔹 Total deposits – The total money added to the account.
🔹 Total withdrawals – The total money taken out.
🔹 Closing balance – The final amount after all transactions.

C. Transaction History

This is a detailed list of all the transactions. Each transaction has:
🔹 Date – When the transaction happened.
🔹 Description – What the transaction was for (e.g., ATM withdrawal, employer deposit, bill payment).
🔹 Withdrawal amount – If money was taken out.
🔹 Deposit amount – If money was added.
🔹 New balance – The account balance after the transaction.

3. Sample Account Statement & Breakdown

What Can We Learn from This Statement?

✅ The account started with $5,000 on April 28.
✅ The account holder withdrew $103 from an ATM on May 1.
✅ The employer deposited $1,500 on May 15 and $1,200 on May 31.
✅ The person spent $50 on groceries and $12 on fast food in May.
✅ The final balance at the end of the month was $6,565.

4. Why Checking Your Statement Is Important

🔹 Detecting errors and fraud – If there is a charge you don’t recognize, you should report it immediately. Banks usually allow 60 days to dispute errors.
🔹 Avoiding overdraft fees – Checking your balance regularly helps prevent spending more money than you have.
🔹 Budgeting wisely – Reviewing spending habits can help you save money and plan better for the future.

Security Tip:

Never share your PIN (Personal Identification Number) with anyone. It keeps your money safe when using a debit card. Choose a PIN that is hard to guess, and never write it down near your card.

Section 4: Managing Your Account Wisely

Having a bank account is useful, but managing it wisely is even more important. Good money management helps avoid unnecessary fees, prevent overdrafts, and keep your finances safe. This section will cover:
✅ How to track your spending and stay on top of your balance.
✅ Ways to avoid extra fees and overdrafts.
✅ Banking security tips to protect your account from fraud.

1. Tracking Your Account Balance

One of the most important habits in managing a bank account is knowing how much money you have. Spending more than what’s available can lead to overdraft fees or declined transactions.

How to Check Your Balance

✅ Online banking & mobile apps – Most banks have apps that let you check your balance anytime.
✅ ATM balance inquiry – You can check your balance at an ATM without making a withdrawal.
✅ Bank statements – Reviewing your monthly statement helps you track deposits and withdrawals.
✅ Calling your bank – Some banks have phone banking services that provide account information.

Example:
Emma checks her banking app every few days to make sure she has enough money for bills and groceries. This helps her avoid overspending.

2. Avoiding Extra Bank Fees

Banks charge different types of fees, but many can be avoided with good habits.

Common Bank Fees & How to Avoid Them

Example:
Jason used an ATM from a different bank and was charged a $3 fee. Next time, he plans to use his own bank’s ATM to avoid the charge.

3. Smart Banking Tips

There are small habits that can make a big difference in managing money effectively.

🔹 Set up direct deposit – Get your paycheque deposited automatically into your account.
🔹 Use automatic bill payments – Avoid late fees by setting up bills to be paid automatically.
🔹 Keep a spending log – Write down purchases or use a budgeting app to track expenses.
🔹 Transfer extra money to savings – If you don’t need all the money in your chequing account, move some to savings to avoid spending it.

Example:
Ava sets up automatic payments for her phone and internet bills. This way, she never forgets to pay on time and avoids late fees.

4. Protecting Your Bank Account

Security is an important part of managing an account. Banks have safety measures, but customers also need to take steps to keep their accounts secure.

Tips for Keeping Your Account Safe

✅ Memorize your PIN – Never write it down or share it with anyone.
✅ Use strong passwords – For online banking, use a password that is hard to guess.
✅ Enable two-factor authentication (2FA) – This adds an extra layer of security when logging in.
✅ Avoid banking on public Wi-Fi – Hackers can steal your information if you log in on an unsecure network.
✅ Check your statements for fraud – Report any transactions you don’t recognize.

Example:
Liam receives a text message saying his bank account is locked and asks him to click a link to "fix" it. Instead of clicking, he calls his bank directly to check. It turns out the message was a scam.

5. What to Do If You Lose Your Debit Card

If a debit card is lost or stolen, it should be reported immediately to prevent unauthorized transactions.

Steps to Take:

1️⃣ Call your bank to report the lost card. They can freeze the account.
2️⃣ Check your account for suspicious transactions.
3️⃣ Request a replacement card from the bank.
4️⃣ Update any automatic payments linked to the old card.

Example:
Carlos lost his debit card at a restaurant. He called his bank right away, and they froze his account before anyone could misuse it.

Final Checklist for Managing Your Account Wisely

✅ Check your balance regularly to avoid overdrafts.
✅ Use your bank’s ATMs to avoid extra fees.
✅ Set up automatic payments for important bills.
✅ Keep your PIN and passwords safe.
✅ Report lost cards or suspicious activity immediately.

Smart banking habits help people stay in control of their money, avoid extra costs, and protect their finances.

Section 5: Vocabulary

Understanding key banking terms makes it easier to manage a bank account and read an account statement. Here are some important words and their meanings.

1. Banking Terms

🔹 Account Statement – A document showing all deposits, withdrawals, and the balance in an account over a period of time.

🔹 Balance – The amount of money in a bank account at a given time.

🔹 Deposit – Money added to a bank account (e.g., paycheque, cash deposit, e-Transfer).

🔹 Withdrawal – Money taken out of a bank account (e.g., ATM withdrawal, debit purchase).

🔹 Chequing Account – A bank account used for daily spending and transactions.

🔹 Savings Account – A bank account designed for saving money, often earning interest.

🔹 Interest – Extra money earned on a savings account or charged on a loan.

🔹 Overdraft – When a person spends more money than is available in their account, leading to a negative balance.

🔹 Overdraft Fee – A charge for spending more than what is in an account.

2. Security & Online Banking Terms

🔹 Debit Card – A bank card that allows the holder to spend money directly from their account.

🔹 PIN (Personal Identification Number) – A secret number used with a debit card to keep an account secure.

🔹 Online Banking – Using the internet or a banking app to check balances, pay bills, and transfer money.

🔹 e-Transfer – A way to send money electronically from one bank account to another.

🔹 Fraud – When someone illegally takes money from another person’s bank account.

Section 6: References

This handout was created using reliable financial literacy resources to ensure accuracy and clarity. Below are the sources used:

📌 Martin Family Initiative. (2022). Understanding an Account Statement. Retrieved from Financial Literacy – Student Edition. This resource provides detailed explanations of bank statements and transaction records.

📌 Government of Canada. Financial Literacy Resources. Retrieved from https://www.canada.ca. This site offers official guidance on banking, saving, and managing money wisely.

📌 Major Canadian Banks & Credit Unions. Information about bank accounts and financial services was gathered from websites of RBC, TD, Scotiabank, CIBC, BMO, and credit unions like Vancity and Meridian.

📌 ChatGPT (2025). Understanding Bank Accounts & Account Statements. This handout was generated using AI to simplify financial concepts for students while maintaining accuracy.

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