|
Before You Move Out or Leave School Time to Open Up Your
Student Bank Accounts
Time to "Fly Solo" with student bank accounts At the age of 18, you officially became - or will become - responsible for your financial life. Yes, that means flying solo and opening student checking and student savings accounts. Although leaving the nest will bring with it many exciting benefits, there are also new things you should know to make life easier on you.
Of course, your parents may cover some expenses for the next few years - things like health insurance and other bills that you agree on. However, it is important to realize that, as an adult, you are making financial decisions now that will directly impact your own future and having the right student bank accounts in place will help.
How you manage your student bank accounts today will determine whether you're able to live the lifestyle you desire tomorrow.
Banking on Banks - How Banks Work Banks play an important role in our money system and economy. When you deposit your earnings into a student savings account, the bank pays you interest on every dollar you keep in that account. At the same time, the bank uses your money to make loans to other account holders.
o Savers - deposit money and earn interest o Borrowers - borrow money and pay interest to the bank
One way the bank makes lots of green is by loaning money to people at higher rates than they pay the people who deposit money. For example, you deposit money in a student savings account and earn 2.25% interest. The bank can then loan money to customers at 8%! The bank earns the difference.
You need to establish a relationship with a bank and keep your credit history respectable so that the bank can help when you need to borrow for buying a car or a house.
Do I need a student bank account? Short answer: Yes. Long answer: You need to open a student bank account for several compelling reasons:
Also opening a student bank account rather than a typical account will give you many advantages - lower fees, added services, reduced account minimums to name a few.
How to Choose the Right Bank When you open a student bank account, you are potentially establishing a relationship that may last quite a few years. Large, national banks offer many services, some of which you may not use now, but you may in the future.
Building a long-term relationship with a bank means you will one day receive preferred treatment. The next time you need a student credit card or other type of loan, you will typically qualify easier and pay lower fees because of the relationship you have built. Think of it this way: the sooner you open your student savings and student checking account, the sooner you will enjoy preferred treatment.
In order to decide which bank is right for you and your money, you need to consider your expectations and purpose for opening an student bank account: is it for business, pleasure, savings, wage-depositing, eventual loans, etc.?
Online Banking Student checking accounts that offer online banking simplifies your life and makes all your banking transactions available at the click of a button. As well, it gives others the impression your bills are handled by a professional accountant.
Choose a bank that offers online bill pay. In today's economy, it's a feature you cannot do without. You are able to check balances from the comfort of your own home or office. Electronically, you can pay monthly utility, cell phone and credit card bills without ever writing a check. Plus, I have to admit, it's pretty cool sending money using my cell phone.
When shopping for a student bank account to open, choose one that offers a quality online bill pay service. Most of the bigger banks offer excellent online banking services; just choose the one that fits your needs the best.
Location and Fees Banks have to be competitive, so it pays to compare fees for opening and running an account. There are often fees for both checking and savings accounts. Additionally, the bank may charge separate fees for such things as:
Make sure to ask and compare all potential fees before settling on a particular bank.
Also, you may want a bank that is convenient to where you work or live, but since you can now access your accounts online or by phone, many bank transactions can be done without stopping in. However, it is important to check out the convenience of each ATM (Automatic Teller Machine) location. You can withdraw money from any ATM in the network, but if the ATM is owned by another bank, you will pay a fee. These fees range from $1 to as much as $5. So you will want to find out if there is an ATM for your bank in your neighborhood for ease of access to your cash.
Taking Account of Student Bank Account Options Once you have chosen the bank that best suits your needs, open a student checking account and two student savings accounts. The student checking account is where you will conduct your day-to-day business, as explained below. Student savings accounts are where you will put your 'fun' savings, long-term savings and emergency fund.
Student Checking Accounts A student checking account is where most of your transactions will take place. This is the brain of your student bank account and will handle most of the in's and out's. For this reason, student checking accounts pay little or no interest.
Plus, this is the student checking account into which your paycheck can be deposited. You can then write checks from the account to pay bills, or pay bills online, use an ATM card to get cash out, or make purchases and have money immediately withdrawn from your student checking account.
Student Savings Accounts Savings accounts pay interest for each day you leave your money on deposit. These are the accounts where you deposit money for short-term and long-term savings. As the amounts in your student savings accounts grow, the effect of compound interest gets real exciting!
I suggest that you open two student savings accounts to make it easier to manage your savings. One account is where you will have your emergency fund - enough cash set aside for six months of your expenses. Additionally, this will be the resting spot for your long-term savings. You also want to have a short-term fun student savings account that is separate from your long-term student savings account. This way you will know exactly how much you have leftover to spend on vacations, toys and clothes for you, and gifts for others.
Student savings and student checking accounts can be "linked" so you can transfer money with ease between accounts. This can make saving your money easier.
FYI - Your student savings account can also act as collateral for a secured credit card.
Tracking and balancing your student bank accounts Santa Claus might check his list twice, but how about you? Can you track and balance your checking and saving accounts?
It is important to have a good understanding of your account balances, so you know how much money you have available to spend at any time.
Review your monthly statement and check your account activity online a minimum of two times a month. It takes just a few minutes! Conducting your finances electronically will make this task a "no-brainer."
The other reason it's important to review the statement from the bank on the same day that it arrives is to check for errors.
Sure, it's easy to put off checking your statement but just one mistake - either by the bank, you, or a third party - could cost you hundreds of dollars (or more!). The sooner you catch these mistakes, the easier they are to fix. In cases where there are fraudulent charges, identifying them early will save you money, too.
So, get in the habit of balancing your checking and saving accounts. This is the first step to becoming a savvy banker!
Pay the bills - get organized! One of the most important skills you can learn is how to pay your bills on time, before they are due.
Sure, it might seem cool to carry a balance in your checking account, but it's only a 'virtual' balance if there are bills in your in-tray waiting to be paid.
How you organize your bills is very much an individual process, because what makes sense for you might not work for your roommate. It's likely, of course, that when you start out, you will not have a huge number of regular bills to pay, and it will be pretty easy keeping everything tracked.
However, as your finances get more complicated, you may have to check your account a few times in the month to make sure you have enough money to pay each bill before the due date.
There's no time like the present to start developing the habit of keeping your finances organized and paying your bills on time. Using automatic online bill paying from your bank can make this a breeze. The bank then sends a check for you, each month, for a given amount and on a date you select.
When you register for a student online bill pay account, you can set up the list of "payees" that you will pay on a regular basis. You set the amount of payment and the date it will be sent each month. For example, your rent of $600 is due on the 1st of every month. You can set up a bill pay service so the bank will directly mail the payment on the 24th day of every month. It's easy as point and click, thanks to online banking.
Try and do this for all your regular bills. It will cut down the number of checks you need to write as well as remembering to pay them on time.
Online bill pay has many advantages: o Looks professional - the checks are typed out by the bank o Payments are sent like clockwork o You have accurate records and up-to-the-minute reporting o Your accounts are automatically balanced o Makes college banking easy
Also, for many reasons you may want to be able to retrieve a bill statement after it is paid. You may need to find a transaction to verify a date of purchase for a warranty, for example, if your TV breaks down. You can get your statements online from the convenience of your home.
Author, Vince Shorb, gives young adults the tools they need to build their foundation of wealth. You can access free instructional videos at www.FreeBy30.com and read about his latest book 'Financially Free by 30'. |