Background
In the past, the monthly reconciliation of your checkbook register with the bank statement was a standard ritual. Up until the 1960’s it was common for public schools to teach how to do this. However, this is certainly no longer the case. Does anyone balance their checkbook anymore…and does it even matter?
Findings
- Nope: 79% of American adults report they never or rarely balance their checkbook. Based on my own qualitative interviews, many of the other 21% aren’t being truthful. Just ask your friends/kids/partner/next door Millennials. Balancing is rare.
- But we check our balances all the time: One study reports that one in three checking account holders check their balance…daily! Another one third check it weekly. If you’re not balancing your checkbook, at least you’re finding out if you’re out of money.
- Yet we still mess up and overdraft: 1/5 of Americans report paying an overdraft fee in the past year. 90% of those said they overdrafted without realizing it.
- And have no idea what we spend: Only 1/3 of Americans claim to have an idea of what they spent in the past month. This is much lower for younger adults, 27% for Millennials and 23% for Gen Z.
Implications
OK…does it matter? If you keep track of your balance and there probably aren’t any big or weird bank errors or fraud in your account, so what? If you’re using a debit card, it’s hard to spend more than you have!
Yet I’d argue there are two good reasons to balance your checking account (at the risk of sounding too old school). The first, smaller one, is to catch any errors or fraud in your account. Do you really trust your bank to be perfect?
The larger reason, though, is to understand your spending. If you’re not reviewing how you spend, you can’t manage it. Consider that the evolution of spending puts us farther and farther away from the reality of money. WE’ve moved from paying with cash, to writing checks, to swiping a debit/credit card, to now waving your phone at a terminal. Spending doesn’t feel like using real money. A monthly review of what you spent increases your knowledge of it and will probably make you think twice about certain expenditures. We’ve seen that for the past 40 years the savings rate has been on a downward slide – is part of this because we don’t even pay attention to expenditures?
There’s a need for basic financial education of Americans before they turn 18. Parents seem unable to do it (how can you teach it if you don’t know it yourself?). And it is certainly NOT the one-day quick hit “finance day” that seems popular with many bank/brokerage funded education programs. It has to be ongoing education, as a partnership between schools – choosing their curriculum – and financial services firms that are willing to dedicate the resources to helping it work long term.