Is a Bank Account Worthwhile for Poor People

A bank account is something the rich and the poor should share in common. Poverty should not be an excuse for avoiding opening a bank account; rather it should be a priority as a step away from poverty. The poor who fail to use a bank account will find themselves paying more for services in the long run and remain poor longer too.

Everyone has bills to pay, including the poor. It is still possible to pay by money order, but the cost to do so does not make sense. It may only cost a quarter, or maybe as much as $1.50 or more to get that money order, but over time it adds up.

If the average cost of a money order is only fifty cents, and only one per month is needed (which is likely very underestimated), that is $6 over the course of a year. It might not seem like a lot, but that is living large at the fast food restaurant for a meal out, or could equal two days of meals in home with careful planning.

A bank account is also the start of a financial relationship. People with bad credit or no credit can establish credit through a bank account. A little money saved over time grows into a lot of money. Establishing a positive balance provides a means for obtaining loans against that money to build credit. Not many creditors will believe how many dollars a person says are under the mattress, but they do believe a bank statement.

The key to obtaining a bank account, however, is to watch for all the hidden fees. A fee free checking account may not be so free if it requires a savings account with a minimum balance attached to it. Also, the cost of checks can add up too, but today many banks allow payment online to avoid ever having to write a check. Public libraries offer online services, so having no computer or Internet access is not an excuse.

Some banks have programs to help educate and train individuals in better money management. If you receive payments by check, direct deposit will allow you to have access to your money faster, and all of it, rather than going to a corner store that may cash it for a fee or require a purchase.

A bank account won’t make a poor person rich. Typically interest rates are below the rate of inflation. Obtaining a high interest yield money market account to do better than inflation, typically takes more cash and time than someone who is tight on money can afford.

Technically it is better to buy and then sell goods to beat the inflation rate when investments cannot match or exceed inflation. If selling the goods for more, or at least obtaining some of the useful life while selling or trading it for something else, your money will stretch further.

Regardless, having a bank account to do this helps. In the long run, saving a little bit each month will generate enough principle to then move into a higher yielding investment even though inflation is eating away at it. Ultimately, when the time comes to move into that investment, it will be easier to do so with a bank account.