When you reach your 20s, there are certain things you that you just should know, like how to cook a few healthy meals that don’t come from the freezer, iron a shirt or blouse, and book your own travel from start to finish.
On top of this, there is a laundry list of financial skills waiting to confuse you, like writing a check, signing a lease, or doing your taxes. Adulting is hard!
How to write a check, deposit a check, or cash a check
You probably received a stack of these mythical creatures when you opened your bank account. With the abundance of payment options that can be completed by phone or online, you may wonder what a check even is or why you need checks at all. Unfortunately, certain payments—like paying rent to certain landlords—can only be done by check or money order, so that the recipient does not incur credit-card or other fees. You’ll probably be cashing more checks than writing them, but it is still good to know how to write a check, deposit a check, and cash a check.
How to write a check:
Before you write any check, there’s something you should always check on first: your balance.
- Don’t write a check for an amount that won’t be in your checking account when the check will be cashed—and you can’t control whether someone will cash the check today or in a month.
- For example, if you’re going to be writing a check for $800 for rent in a week, and you have $900 in your account (with a paycheck coming soon), don’t assume you’re good to go. Taking out cash now for a new pair of running shoes may sneak up and run you over. You don’t know when the paycheck will clear, and you also may not know what other older checks haven’t cleared yet (unless you look at your account online). Not only will your rent check probably bounce, but you will likely incur an overdraft fee, having made that last purchase a lot more expensive.
Filling out checks: For First-Time Users Only
Filling out a check may look complicated the first time, but it’s pretty straightforward.
Basic Overview of Terms.
Date.
- Fill in today’s date in the upper right-hand corner of the check.
- The format should be month/day/year, and can be written Jan. 2, 2018; January 2, 2018, or 1/2/2018
Payee.
- Fill in the line that says “Pay To The Order Of.”
- If you’re paying a real person, this should be the legal name of the person (not a nickname).
- Write at least the full first and last name. You can add a middle name or initial if you want, or titles like Mr., Ms., Dr., etc., but this is not necessary.
- If you are paying a company, ask the recipient whom the check should be made out to. Most bills will say something like: “Make check payable to: _____________.” Use that word-for-word. Some companies are X dba (doing business as) Y. If you write out Y, they may not be able to deposit a check and may tack on an extra fee for rejected or late payments.
- Making a check out to “Cash” is risky because anybody can cash it. It’s better to make the check out to an actual person or entity.
Dollar Amount.
- The amount of the check is written two different ways:
- the numerical amount (with $ sign on the left) on the small line or blank box on the right side of the check; and
- spelled out in words on the long blank line in the center of the check.
- For the numerical amount with the $ sign to the left:
- Use numbers in dollars and cents:
- $150.00 or $150 xx/100 or $150 no/100. These all mean the same thing.
- $150.75 or $150 75/100. These both mean the same thing
- Start on the far left, use cents, and always put a line to the right to cover the rest of the box. For instance, $150.00———–. This helps prevent fraudulent changes to your checks.
- Make sure your handwriting is legible. A 4 can look like a 9. A 1 can look like a 7. A 5 can look like a 6. Write clearly.
- Use numbers in dollars and cents:
- For the amount spelled out in words on the long blank line in the center of check:
- ________Dollars: write out the exact number in words, followed by a fraction for the cents, and then fill any open space with a line.
- For the previous example of $150.00, write out “One hundred fifty and 0/100————————” or “One-hundred-fifty and 0/100————————” (You don’t have to write the word “dollars” because that word is already pre-printed on the check at the end of this blank line.)
- Draw a line from the end of the last spelled-out word through the rest of the blank line to prevent anyone from writing any additional words there.
- Start writing from the far left:
- For the numerical amount as well as the amount written out in words, make sure you start writing the amount as far to the left side of the available space as possible, to prevent someone from fraudulently adding in extra digits in number or word form.
Memo line:
- If you want to add a note in the memo line (in the bottom right corner) you can, but this is optional from the bank’s perspective.
- You might write something like an invoice number, an account number, or some other information that helps the recipient link your payment with you (and sometimes is required by the payee). You can also write something like “August Electric bill” or “May Rent” or “Apartment 15F Security Deposit” or any other words of description. DO NOT TREAT THIS LIKE VENMO—writing something inappropriate, no matter how witty you think it is, could result in a rejected check.
Signature line (blank line on the bottom right).
- This may say signature or may be blank.
- Sign your John or Jane Hancock and you are finished.
The number in the upper right corner.
- On the top right of the check is the check number (this is NOT the account number). In a checkbook, checks will always be in numerical order. This is one way to help prevent fraud and also keep you organized. In the ye days of olde when people actually “balanced” a checkbook, they matched these numbers and check amounts with checks listed on their bank statement, etc. It’s not a bad idea to track this so you make sure someone isn’t snagging checks out from under you. (Hey, if it can happen to Anne Hathaway, it can happen to anyone.)
How to deposit a check.
- A check is an instrument that orders a bank to pay a certain amount of money to a payee.
- Before the payee can cash or deposit the check, it must be endorsed, i.e., signed by the payee on the back of the check.
How to endorse a check to be deposited.
- On the back of every check, there is one end that says “Endorse Here.” In that section, write “For Deposit Only” on the first line, and sign your name on the second line. This is called a “restrictive endorsement.” The check can now only be deposited to your account.
- When depositing a check, don’t just sign your name on the back without also writing “For Deposit Only.” If you simply sign your name and the check is misplaced or lost, that check can now be deposited or cashed by someone else. Always restrictively endorse your checks when you want to deposit them. (Again, this is to be extra cautious. Check fraud isn’t what it used to be and depositing technology has come a long way. To give a bit of history, Citibank no longer requires a zip code on the endorsement line nor even a deposit slip.).
- If you want to be even more careful with the deposit—e.g., if the check is for a large amount—you can add your account number and bank to the endorsement section on the back of the check:
First line: “For Deposit Only”
Second line: “To Account # ___________________ at ________________ Bank”
Third line: Your signature
This extra information tells the bank that the check can only be deposited into the exact account number you provided.
You also could go walk up to a teller and engage with a human.
Ways to deposit a check.
You can deposit a check using your mobile phone, at an ATM, or in person at your bank:
- By mobile app:
- Make sure you have endorsed the check (see above “How to endorse a check to be deposited”).
- Download the mobile app for your bank and set up username and password (or sign in if already downloaded).
- Click the button or icon for “Deposit.”
- On the deposit screen, follow the steps, which typically include: take a photo of front and back of check; select account to deposit into; input the amount of the deposit; and confirm the transaction.
- Make sure to sign out when done.
- Different banks have different rules for how long to keep a check that was deposited by a mobile app. They may also only allow mobile deposits up to a certain amount. Follow the rules provided by your bank.
- At an ATM:
- Different bank ATMs have different steps, but the process begins by inserting your debit/ATM card and selecting the option to deposit a check.
- You will need to enter the amount of the deposit and the account to deposit the money into.
- Place the endorsed check (see above “How to endorse a check to be deposited”) directly into the designated slot (if no envelope is provided), and then confirm the transaction as prompted.
- You should receive a receipt for this deposit (which usually also has an image of the check if no envelope was used).
- Different bank ATMs have different steps, but the process begins by inserting your debit/ATM card and selecting the option to deposit a check.
- In person:
- At the teller window of your bank, present your endorsed check (see above “How to endorse a check to be deposited”) to the teller, and they usually require either a completed deposit ticket (also called a “deposit slip”) or your ATM/debit card. You can find personalized deposit tickets at the back of each batch of checks in your checkbook or you can get a blank deposit ticket at your bank.
- Make sure to get some written form of receipt or proof of the deposit. (Sometimes this could just be an email.)
- It’s a good idea to check the deposit via online banking after you leave the bank. It may show up as pending, but check the amount and the date.
How to endorse a check to be cashed on the spot.
- Sign your name on the back of the check, in the section that says: “Endorse Here.” This is called a “blank endorsement,” because it has no restrictions.
- Sign this only when you are ready to cash it (such as when you are at the bank) to minimize the chance that the check can get lost and cashed by someone else after you’ve signed it.
How to cash a check at your bank.
To cash a check at your bank, present your endorsed check to the teller and state that you want the check to be cashed. Upon showing proper ID, you will be given cash for the amount of the check.
How to set up automatic savings at your bank
If you want to save a certain amount each month in a savings account, setting up an automatic transfer is a good way to put this task on autopilot so that you don’t have to remember to move the funds yourself. Different banks have slightly different procedures, so follow the prompts for your bank. The steps typically include:
- Select the transfer option from online banking.
- Indicate whether the transfer is between accounts at your bank or between accounts at your bank and another bank.
- Select the “transfer from” and “transfer to” accounts via a drop-down or add another bank to the list of choices.
- Indicate the amount of the transfer, whether it is a one-time or a recurring (automatic) transfer, frequency, date, and end date.
- Confirm the automatic transfer setup via a confirmation page.
- When reviewing your online banking periodically, check that the transfer is showing up correctly to and from both accounts.
- Make sure you have enough funds in the “from” account to make the scheduled automatic transfers.
- Automatic transfer requests can be turned off or changed going forward if you change your mind or your financial circumstances change.
How to open a brokerage account.
- If you are new to investing, take a look at Investing 101, which explains some of the basic terminology, choices, and approaches that you may want to know about before you invest.
- When you are ready to open a brokerage account, you’ll need to decide what type of account you want to open; whether you want assistance, i.e., do you want to have a managed account or use a robo-advisor; what broker you want to use; how much you want to invest; and what your risk tolerance is.
- You can open a brokerage account in many different ways, in about 15 minutes.
- Opening a brokerage account can be done through:
- mobile app (for online brokerage accounts or for accounts through a robo-advisor)
- online (and many also provide assistance, if needed) or
- in person at a brokerage firm’s office
- If you are opening an account using an app or online, simply follow the prompts, which work step-by-step through some or all of the issues addressed above.
- If you are opening an account in person or with telephone assistance, the financial representative will lead you through the same process.
- You will need to fund your account by providing access to your bank account.
- You also need to provide your name, address, citizenship status, social security number (for tax/AML purposes), and answer a few other basic questions.
How to check your credit score and your credit report.
It’s a good idea to know your credit score and to check your credit report once a year to make sure everything in it is up-to-date and accurate.
- You can access your credit report for free once a year from each of the three credit-reporting companies (Equifax, Experian, and TransUnion) through www.annualcreditreport.com. (See Federal Trade Commission Consumer Information: Free Credit Reports.)
- Many credit-card companies will provide your credit score for free.
- You can also get your credit score here: CreditKarma, CreditSesame, and CreditWise (CreditWise is from Capital One, but you don’t have to be a Capital One customer to use the free service).
- It’s a good idea to check your credit report once a year to make sure everything in it is up-to-date and accurate.
How to create a budget.
- Creating a budget and tracking your spending help you to see where your money is going and find ways to cut back on spending.
- See Otterwize’s Budgeting & Net Worth (under “How to create a budget”), which talks about how to track net income and expenses, create a realistic budget to allocate your income to expenses going forward, and compare your actual spending to your budgeted amounts.
- You can also create a budget using one of the many budgeting tools, such as YNAB (You Need A Budget), Personal Capital, and Mint.
- If you want to analyze your budget using the 50/30/20 Rule, see details here under “How should your monthly budget be divided up.”
How to calculate your net worth.
- Net Worth = Total Assets – Total Liabilities
- Net worth shows you a snapshot of your financial picture at a particular point in time.
- You can use Ottterwize’s free Net Worth tools. Additionally, there are many apps, software products, or other net worth templates, such as Personal Capital, Mint, etc)
- Net worth can also be calculated with simple paper and pencil.
- You should also know the specifics of what goes into the total assets and total liabilities calculation.