For many 18-year-olds, this newfound
freedom will also bring the first taste of financial independence. While
some may already have savings accounts in place, most will have to set
up new accounts as they leave home and manage day-to-day cash flow for
the first time.
College freshmen should consider the following seven rules before starting a relationship with a financial institution.
*Focus on free: Almost
by definition, students don’t have a lot of money—so they need to be
especially conscious of fees that can eat away at what little funds they
do have. MyBankTracker.com co-founder, Alex Matjanec,
recommends looking for an account that has the following features: no
monthly maintenance fee, negligible or no minimum balance requirement,
free debit card, free ATM usage at your bank, free online banking, free
cheque writing, and no money transfer fees.
*Mix it up: Your
current and savings account don’t have to be at the same bank,
especially if you can receive a higher Annual Percentage Yield on a
savings account elsewhere. You may have to go online to find the best
deals, something that shouldn’t concern most millennials who were raised
on the Internet.
“Online savings accounts offer higher
yields and lower minimum deposits while maintaining access to the money
and the safety of federal deposit insurance,” says Bankrate.com’s chief analyst, Greg McBride.
Make sure you’re comfortable
transferring money electronically, however, otherwise you’ll have to
mail in any deposits. If your part-time job involves a lot of cash, for
instance, you might be better off at a bank with brick-and-mortar
locations.
*Ditch the school pride:
You may be tempted to just go with the first bank you see near campus,
or the one your university seems to endorse. Not so fast, though.
“Don’t pick a bank just because your school has a relationship with them,” says NerdWallet.com’s Nico Leyva. “Make the decision after doing the research to determine what is going to suit your needs best.”
*Weigh ATM convenience:
A current account is essentially a spot to store short-term cash—so
when you need to access that money to buy stuff, you’ll want to avoid
ATM fees. You have a few options to consider.
Large national banks will probably offer
a number of branches and ATMs from which you can access your cash for
free. Just make sure that you’re not being hit up for other fees on the
account.
You can also look to banks with a strong
presence near campus; these may have fewer fees than their
too-big-to-fail counterparts. Unless you’re sticking close to home,
however, be sure that your parents can transfer money easily into this
account without fees.
*Use your phone to keep tabs:
Your phone can be a powerful tool for keeping an eye on your balance.
“Using technology to monitor your account activity and available
balances is a great way to be on guard against fraudulent transactions
and also your best strategy to avoid costly overdrafts,” says McBride.
*Beware overdraft protection:
While the name may sound prudent, overdraft protection is generally
something that students want to avoid. Because such services usually
bring high fees, you’ll be better off simply sticking to a budget — or
accepting the embarrassment that comes with a declined transaction.
“Don’t let anyone persuade you into overdraft protection,” says Money-Rates.com’s
personal finance expert, Richard Barrington, adding, “Overdraft fees
are very expensive, and in particularly college students should learn to
do without overdraft protection so they develop responsible banking
habits.”
*Think ahead: If you’re
using a specially designated student account, be aware of any age
restrictions. “Many student accounts have age limits, at which point the
account converts into a standard current/savings account with different
fee structures,” says Matjanec.
If you’re going to get stuck with an
automatic conversion, make sure the standard account doesn’t come with
onerous fees, high monthly minimums, or other undesirable traits.
Importance of opening your first student account
There are a lot of events that mark the
transition from school, but few will have the significance of opening
your first student account. Having your own student account is your
acceptance of the financial responsibility that comes with adulthood. Of
course you will need one if you have to pay bills or deposit cheques in
school, but there are several other reasons why opening a student bank
account is important, according to https://lendedu.com.
To become financially literate:
Going to school is more than getting a degree. It’s also a pathway to
the things you need to learn about in life – how to live as a productive
adult. A big part of that is being able to manage your personal
finances and that begins with your student account. Even if you never
write a cheque in your life (using online bill pay, debit cards and your
smartphone instead), your student account is like your spine. It
connects all the nerve endings of your finances. Understanding money
going in and money going out and balancing the two is critical to your
financial life from the beginning. In the digital world, most everything
you need to know about your student account can be found instantly
online or with a mobile app.
So you can earn a pay cheque:
If you plan on working part-time as a student, your pay cheque will
need a receptacle, which is typically a student current account. Many
employers offer direct deposit of your pay cheque which gives you
quicker access to your funds, but you need a student current account.
When you need money quickly:
With many of the best banks, you can link your student current account
with your parent’s current account, which would allow for immediate fund
transfers between your accounts when the need arises. Even if you
prefer not to have your accounts linked, getting a cash infusion from
your parents is easily done with an electronic funds transfer from their
separate account to yours.
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