The basics of banking
Learn the fundamentals of the world of finance.
Current Account
A regular bank account. It comes with a debit card. You can also set up Direct Debits and standing orders to pay regular bills automatically.
Direct Debits and standing orders
Regular payments that leave your account automatically.
A Direct Debit is set up by the person you’re paying - like your mobile phone provider. The amount can change.
Standing orders are for a fixed amount and you have to set them up yourself. They're a good way to regularly pay family or friends if you owe them money, like for your share of the rent.
There’s a third kind of regular payment, called a ‘Continuous payment authority’. This is when you give a company your card details instead of your account number and sort code. Some streaming services charge their customers this way. Even when your card expires or is replaced, the company can keep taking the money!
You get more protection with a Direct Debit if something goes wrong so always try to set one up if you have the option.
Finally, it’s a good idea to have all these types of payments set to leave your account on the day you get paid or as close to it as possible. That way, it’s easier to budget with what’s left.
Debit card
A debit card is used to make payments. It takes your money out of your current account.
It can be contactless (used without a PIN). You can connect it to your phone or smart watch to buy things in shops.
It can also be used to shop online and get money from cash machines.
Savings
It’s a great idea to save money, just in case you need it unexpectedly. You also earn interest on money you have in a savings account too.
Plus, if you’re thinking far ahead, you will probably need a deposit to rent or even buy somewhere. There’s no time like the present to start setting some money aside. To find out more about saving, have a look here.
ISA
An individual savings account (ISA) allows you to save up to £20,000 per year without having to pay tax on any interest you might earn (since savings income still counts as income!)
But most of you reading this can earn up to £1,000 in interest, tax-free, on your savings anyway, thanks to something called the Personal Savings Allowance 
.
Pension
You pay into a pension during your working life so that you have an income when you retire. It’s like a special sort of savings account.
Although you get State Pension from the government, that won’t be enough for most people to live on. This is why you need your own pension on top. Plus the State Pension might be different by the time you come to retire.
Although retirement may be a long way off, it’s better to start as early as you can.
Why is better to start early?
Anything you pay into your pension is invested. This is to try and grow them. Investments don’t always give a guaranteed return but the sooner you start the more likely you are to be able to ride out the long-term ups and downs.
Plus, something called compound interest plays a part too – where you start earning interest on your interest. This all helps your pension pot to grow.
How do I start paying in to a pension?
When you you earn a certain amount of money , you’re automatically enrolled into your workplace pension scheme. This means you’ll have to pay 3% of your income into your pension pot. Your employer has to pay 8% of your income in at the same time.
You can ask to opt out if you’d rather not pay into a pension. You can also ask to opt in, even if you don’t meet the minimum criteria to join.
Are there different types of pension?
There are two main types – defined benefit and defined contribution.
Defined benefit pensions are called that because you know how much you’ll get when you retire (your ‘benefit’). This is usually a set percentage of your final salary, which is why they’re sometimes known as ‘final salary’ pensions. These are rare these days.
Defined contribution pensions get their name because you only know how much you’re paying in to your own individual pension pot (your ‘defined contribution’) – you don’t know what you’ll get at the end.
You may think you just take what’s in your pot when you retire, but it’s not that simple.
You actually use what you’ve got to buy something called an ‘annuity’. This is an insurance policy that pays you a guaranteed income for the rest of your life.
Not as simple as you may think!
In their working life, many people will work for several companies. This means you may end up with loads of different pension pots by the time you reach retirement age. You can merge these in some cases to make things easier, but not always.
