Being in college is a special moment in one’s life. It is the beginning of adult life. When a person starts to have clearer career goals. Perhaps, even when the student starts working. However, being in college is also when financial worries start for many. From entering into student debt to creating the first financial goals, this is the phase that many people start to shape how they will deal with their finances during life. On top of that, saving money when trying to juggle academics, socializing, and working part-time during school can be a challenge.
With that in mind, it becomes clear how important it is to choose the right savings account you will have during college. The right choice can make a significant difference in your financial future. Thus, in this article, you will learn how to choose the ideal savings account for your college student’s needs. Also, it will list you the best options of savings accounts for college students, so you are better informed to start your search.
Saving money can be a challenge in any phase of your life. However, college might take the cake of one of the trickiest periods to build savings. For starters, for many, going to college will mean student debt, which might take years to be paid back. Due to that, a large part of the money one makes during college often goes to paying student debt. College students also have less time to work, since they have to dedicate time to classes and studying. This results in most college students only being able to take part-time jobs. Some even work unpaid internships as an investment in their careers. If all that wasn’t enough, socializing and partying are a great part of the college experience. That’s all fun, and you should definitely do that, but it ultimately costs money.
This context makes saving money a challenging task. But challenging is not the same as impossible. This difficulty makes choosing the right savings account even more important. Starting to build a healthy financial future while still in college is a smart decision you won’t regret making. By doing that you will start growing your money, while also learning how to be financially responsible. If you crack that during this phase, it will become easier long-term.
The optimal savings account should be suited to the needs of every student, from the freshest undergrad to the most veteran graduate student. There are many types of savings accounts out there. Even though they seem similar, they have different characteristics that make them ideal for different types of people. At the same time, there are some things that most college students expect when picking a savings account. To choose the right one for you, these are the factors you should take into consideration:
In college, most people are just starting to build their financial independence. Due to that, some might not be open to the risk of losing the little money they made so far. In contrast, other college students see the fact that they don’t have much at stake and have their whole lives ahead to recover from losing money as a motive to be able to take more risks when investing. How willing you are to take risks when investing is a very personal thing. It will depend on the relationship you have with your finances.
Regardless, savings accounts are some of the safest types of investment. It is very unlikely that you will lose money by putting your funds into a savings account. Still, some types of savings accounts can be safer than others, based on their format or type of insurance. Usually, those insured by the Federal Deposit Insurance Corporation (FDIC) or by the National Credit Union Administration (NCUA) are the safest options. However, fully insured accounts rarely offer the highest interest rates. It usually goes like this: the higher the risks, the higher the returns - even though savings accounts are not considered risky investments at all. In the end, it will depend on your investing profile.
It is no surprise that college students usually look for a good interest rate. At least the best they can get based on the risks they are willing to take. To find the best interest rate you can check each bank and credit union and compare the rate they offer. Or you can use platforms such as Compare the Market or Nerdwallet that compare all the savings accounts on specific postcodes for you. You should always try to find an interest rate that at least pays you more than the inflation rate. Otherwise, you will be losing savings due to the devaluation of the dollar caused by inflation.
If you are looking for the highest-yielding savings accounts, online is where you will find them. Online digital savings accounts have higher interest rates than traditional ones. That is due to the fact that digital entities don't have all expenses that come with a physical location. Thus, if you want the highest returns and you don’t mind the lack of branches, online savings accounts are the best option. Higher yield can be very beneficial when you are still in college and don’t have much in a savings account yet. Seeing your money grow faster can give you some extra motivation to keep saving for your future. It can also bring you closer to being free from student debt, allowing you to focus on other financial goals.
That is one of the things you, as a college student, should expect from a savings account. The whole point of opening a savings account is to save money. So, spending on unnecessary fees that can be easily avoided makes no sense and is a strong no. Nowadays, paying to keep your account open is not necessary. Especially because there are many savings accounts that don’t charge any bank fees. Online savings accounts rarely charge maintenance fees, and if they do, they are usually quite low. Traditional bank accounts, on the other hand, usually charge them. You should always double-check the account’s maintenance fees and compare them with your other options. It is hard enough to save money in college, you don’t need the account to make it harder.
One thing that most college students have in common is no free time. Trying to make space in your schedule to go to the bank is out of the question for many. That is why having easy access to your savings account is vital when you are in college. That makes online savings accounts usually more attractive to college students. First, you can often open an online savings account in less than 10 minutes. Once the account is opened, you can easily access your account from your computer, mobile, or tablet. In the app, your whole banking profile will be available for you to keep control of your money. No need for trips to branches or losing time in a line.
If you like having physical branches or prefer to open a savings account at a traditional bank, make sure you choose one with branches near you. Also, it can be interesting to check online reviews on the branch you would usually go to, to see if the service is good and fast.
Most college students are not financially stable yet. Based on that, it is unlikely that a savings account with low liquidity will be fitting. Accounts that lock your money for a fixed duration, such as certificates of deposits, can be a risk. If you need money, having all your savings in this type of account can be a problem. Still, savings accounts can propose different levels of liquidity by limiting withdrawals or charging penalties for low balances. If being able to access your savings whenever you need to is vital, make sure the savings account you choose offers liquidity. Worse than having few savings, is to increase debt this early in your adult life.
Some savings accounts offer different fees, rewards, and rates for students. It is always worth checking if the savings account you are choosing offers something that you can take advantage of as a student. The benefits for students will rarely surpass the returns of a good interest rate. But, if you are between two similar options and one offers some advantages for students in college, why not take advantage of that?
Once you know what is important in a savings account for college students, it’s time to analyze your options. There are many types of savings accounts available nowadays. They each have their pros and cons, and it will ultimately depend on your needs and goals. Some of the savings accounts options that can be great for college students are:
There are other options out there, but when it comes to savings accounts for college students, these tend to be more fitting. Ultimately, the objective is to start your adult life as financially healthy as you can. College should be a great and important phase of your life. You are transitioning into adult life, shaping who you are as a person. The same counts for your financial life. Is a transition phase in which you will start learning how to take care of your own finances. This experience will be part of shaping your way of dealing with money long term.