Learning personal finance and how to take care of your money is extremely important, especially as a college student. Learning how to manage money now will save you time and money in the future. Thanks to these tried and true tips, I am going to graduate with very little student debt!
Here is what you should know about savings accounts:
1. Know the Different Kinds of Accounts
There are multiple forms of savings accounts, some better than others. By that, I mean they allow you to save more by the amount of interest they acquire. Some of these accounts, however, have very specific requirements and require certain commitments, such as amounts left in the account at all times. Do some research and figure out your best options.
2. Picking An Account
When it comes to picking which account to open, it is important to consider where you are financially at this point in your life. If you work part time hours, like 5-10 hours a week, the basic savings account is for you. If you work full time, without many expenses, and have the ability to put a larger chunk away, open a CD or a MMA. These two accounts give the most interest and are two accounts to pay attention to.
3. CDs vs. Money Markets
These two savings accounts give the account owner the most return with interest. However, they require more of a commitment. CD (certificate of deposit) accounts require a time commitment during which no money can be withdrawn from the account, but can be added. The time commitment can be anywhere from six, twelve, or even twenty four months and require at least $100 to open. Money market accounts (MMAs) require at least $1,000 to be in the account at all times. The owner can only withdraw from the account six times a month. I know that sounds like a lot of money, but this account will earn you more interest than any other account available at this time. Currently, CDs are not earning much more interest than the basic savings account. I would advise waiting until you can put away $1,000 and start a personal money market account.
4. Be Aware of the Fees
The money market account restricts the owner of the account from withdrawing from the account more than six times in a one month period. There are multiple accounts similar to this and it is important to understand the fees resulting from withdrawing too many times. There may even be regular monthly fees just to have an account, although sometimes there are certain requirements that can be met to waive these fees. Each bank is different.
5. Take Advantage Now
As a college student, I understand the struggle to save money. Currently, as an unpaid intern in Washington D.C., I understand the struggle even more intensely. Right now, no matter where you are in your college career, it is important to start thinking about a budget and savings. Recognize the timing in your life. Imagine what you could retire with if you started a 401k now? I started my 401k when I was 19 and, if I continue at the rate I am at, will be able to retire early.
Also, look at what you’re spending and what you can cut to save some extra cash. I choose to save now so I can graduate with as little debt as possible. By following these tips and learning more about which savings account is right for you, you can too.