Want to save more money? Start with these financial literacy basics

Understanding how money works is a practical skill that can save you thousands of dollars over your lifetime. When you know more about financial systems, you'll be better equipped to make decisions that grow your savings and protect your wealth.

In this article, Forbright Bank explores the financial systems that can help you grow your money.

Where to Keep Your Money

To manage and grow your money effectively, you need at least one account at a financial institution. Keeping all your cash hidden in your home is risky and prevents you from earning interest.

When choosing a financial institution, your main choice is between banks or fintechs. Banks operate under strict regulatory oversight and are regularly audited by regulators to provide protection for consumers. Fintechs, a nickname for financial technology companies, operate under lighter regulatory frameworks but may offer accounts that are similar to those offered by banks.

While all banks are insured by the Federal Deposit Insurance Corp., that's not necessarily the case for fintechs. Government-regulated banks are required to provide FDIC insurance for deposits, up to limits established by the FDIC. If you open a deposit account directly with an FDIC-insured bank, your money is insured up to $250,000 per ownership category by the FDIC, which is backed by the full faith and credit of the U.S. government. Whether you use a bank's digital apps or in-person banking, if your money is deposited at an FDIC-insured bank, you benefit from deposit insurance coverage.

How Interest Works

When you deposit money into a savings account, the bank essentially borrows your funds and pays you an agreed-upon rate of interest in return. As you keep your funds in the account, you earn interest not only on your original deposits but also on the interest you've earned over time. This is known as compound interest, and it accelerates the growth of your savings. The earlier you begin saving, the more compounding works for you.

When comparing savings accounts, look beyond the interest rate at the APY, which stands for annual percentage yield. Unlike a simple interest rate, APY accounts for compounding and show the amount of interest the account would earn over a one-year period. A savings account with a 3% APY, compounded monthly, will outperform one with a 3% simple annual rate. Even small APY differences add up meaningfully over time.

Why Interest Rates Change

When you open an account with a specific interest rate, it's important to understand whether that rate may change. For example, savings account rates will fluctuate from time to time, but certificate of deposit (CD) rates are locked in for the term of your CD.

Banks adjust their interest rates based on several factors. The most significant factor is guidance from the Federal Reserve. The Fed sets the federal funds rate, which influences the cost of borrowing across the entire economy.

When the Fed cuts rates, savings accounts and CD rates also drop, reducing what your deposits earn. Those cuts typically also translate into cheaper costs for borrowing money, such as purchasing a home with a mortgage loan. A Fed rate hike has the opposite effect: Borrowing costs rise, but savers benefit from higher yields.

Moving Money Online

In today's financial world, it's common to have several different accounts at different institutions and expect to seamlessly transfer money between them. Moving money online is convenient, but it must be secure.

Most online transfers from one bank to another rely on the safe, well-established Automated Clearing House (ACH) network. ACH is a nationwide network through which depository institutions send each other batches of electronic credit and debit transfers. It's overseen by the Federal Reserve, the central bank of the United States. To ensure protection for your money, ACH transfers typically take one to three days to move from one institution to another. If the transfer requires additional reviews for fraudulent or suspicious activity, it may take longer.

Know Yourself

Even if you know all about the mechanics of money, you'll be more successful if you also have self-awareness. For example, your innate financial personality may mean you're likely to be risk averse or impulsive. Armed with information about how money and banking work, along with an awareness of your own strengths and weaknesses, you can set yourself up to save smarter, avoid costly mistakes, and build wealth over time.

Disclaimer: This article is for general information and education only. It should not be considered financial or tax advice.

This story was produced by Forbright Bank and reviewed and distributed by Stacker.

Copyright 2026 Stacker Media, LLC

This story was originally published June 9, 2026 at 6:00 AM.