What Is An Account? (E) Rated

While it is very possible you’ve heard the term Account before, I thought I’d take a minute to explain just exactly what an account is. If you go out to your favorite search engine, you’ll likely find something that talks about assets, liabilities, and ledgers. I find myself thinking about lions, and tigers, and bears oh my as I write this. If you’re familiar with assets, liabilities, and ledgers, that’s great! I’m guessing most of those words don’t mean a whole lot to you thought. Don’t worry, I plan to cover those in future posts.

An Account these days is a place, typically facilitated through a bank, that has a unique number, where you can put money in or take money out. You can access your account through an app or webpage to see what you’ve put in and what you’ve taken out. While there are a variety of different accounts (e.g., checking, savings, retirement, mortgage, credit card, etc.), generally speaking, they work pretty much the same. More to come on different account types in future posts…

Let’s Relate

an Account to something most of us have and use every day…a dresser drawer. I have a dresser drawer at home where I keep all of my socks. Before I put my socks in the drawer, it was just a unique place where I could put things in and take things out (middle of the dresser on the right side). When I put my socks in, I made a deposit. This is kind of like when your check gets deposited in your bank account. When I get up and get ready, I pull a pair of socks out…kind of like when you take money out of your bank account to pay a bill.

Now, if I don’t do laundry for an extended period of time, it’s possible I run out of socks. If you think about your bank account and budgets, if you spend more money than you make, your account is going to run out (of money instead of socks). That’s it. Remember, not all dressers and dresser drawers are the same – just like not all Accounts are the same. Keep an eye out for additional Unmuddling Money posts soon that will break down the different types of accounts. In the meantime, go wash your socks!

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You have to give these socks a try!

So,

no need to get overwhelmed thinking about assets, liabilities, and ledgers. Just think about money going in, money going out, and keeping track of it all. An account is just the place that all of these things happen. Remembers, I’ll cover different types of accounts and why you may want say, a checking account and a savings account, but for now, let’s keep it simple. Stay tuned for additional Unmuddling Money posts that aim to simplify (and add some humor) to otherwise complicated and boring money topics!